Group Insurance is an appealing component to an Employee Benefits Program. It not only provides financial peace of mind for employees, but can remove the potential for any moral or financial dilemmas for you, the employer, arising from severe injury, illness or death of an employee.
Cost of Group Insurance
It costs less than you might think. Covering a group of people is far cheaper than insuring one person at a time. For example you can reckon on a cost of 1% of your payroll for group life cover, where the amount of cover approximates to three times salary.
Packages available and getting a quote
A package of benefits can be optimised to meet your company budget. Very often a company will introduce a package such as;
Life Cover of three times salary + Income protection for a two year period.
Typically this will be 75% of salary for a two year period after a waiting time of 60 days.
Additional products can be a lump sum Trauma benefit e.g. $50,000 in the event of a range of serious medical conditions, or a lump sum benefit for Total and Permanent Disablement.
Where a Life Insurance cover is the only requirement, this will typically be of a certain amount e.g. $300,000. It could also be expressed as a multiple of salary. e.g. Three times annual salary.
Getting a Quote
For a basic life component, all this required is a spreadsheet with dates of birth and gender. Where there is an income protection benefit, or a multiple of salary involved, then the salaries of the workforce will also be required. Names are not required at this stage of the process.
Advantages of being part of a Group Plan
The Automatic Acceptance Limit (AAL) is the maximum cover amount available to the members when they join the plan without the need for any medical or financial questionnaires. The AAL will vary from group to group depending on numbers, age and occupations of that group. Members who join the group with a level of cover below the AAL are automatically insured.
e.g. The AAL for a particular group may be set at $400,000. If the cover for individuals within the group was based on a multiple of three times salary, then it is likely that most workers would be insured for less than $400,000 and would be automatically accepted.
Cover beyond AAL's
Where a member's initial cover goes above the AAL, that member will need to complete a personal statement. This is a questionnaire about their health and pastimes. Underwriters will then assess each questionnaire and advise their recommendation regarding acceptance at the standard rate. In some cases more information or a medical examination may be required. Any special terms that may result would only apply to that portion of the cover above the AAL.
Group Salary Continuance (Income Protection)
Salary Continuance Cover pays a member a regular monthly amount if they are sick or injured and unable to work. The benefit is generally 75% of salary, and paid if the member continues to be disabled after a pre-determined wait period. This is often between 30 and 90 days. The longer the wait period, the lower the premiums.
Group Trauma Cover
Trauma Cover pays a lump sum of money to help the member recover physically and financially from a serious illness. Typically the amount will be $50 to $100K. The conditions covered are extensive, although the most common illnesses linked to Trauma insurance in New Zealand are; Cancer, Heart attack and Stroke.