Group insurance is a means of affording life insurance protection to all the workers in a given company at a low-cost. A single blanket policy is issued to the employer. Each employee covered by the insurance receives a certificate as evidence of his protection under the group policy. The certificate gives the name of the beneficiary whom the employee has chosen.
A physical examination is required, the only stipulation being that the employee shall be actively at work on the day the insurance goes into effect. There is no age limit; everyone from the office boy to the oldest employee can have protection, but the costs to the company for older employees are high.
Since employees have a greater tendency to leave during the early months of their employment, it is usual to require an employee to remain with the company a specified length of time (usually three months) before he may enjoy the benefits of group insurance. The amount of insurance that any individual employee may carry under the group plan is specified in the contract. The plan may provide for a flat sum for each employee, or the amount of insurance may be determined by length of service, amount of salary or the salary classification, or a combination of service and salary.
When an employee leaves the service of a concern that carries group insurance, his insurance is automatically canceled at the expiration of a given number of days, usually 31. A provision, however, is included in the group policy that an employee upon leaving may convert his insurance into one of the ordinary forms without physical examination. Application for such conversion must be made within a stated time, and premiums at standard insurance rates must be paid upon the policy selected.
Group insurance is the cheapest available insurance because the insurance company is able to sell protection under the group plan at a considerably lower rate than the cost of the same policies purchased for each employee individually. For each group it is necessary to calculate the exact cost according to the individual ages of those insured.
In some instances the employer pays the entire premium; in other cases the premium is paid jointly by the employer and the workers, in which instance at least 75 per cent of the eligible employees must, under the insurance laws, agree to contribute.
The advantages of group insurance may be summed up briefly as:
1. It fosters goodwill and mutual confidence between employer and employee. It reaches the employee through what is closest to him, his love for his family. He feels the company that is looking after the interests of his family is the right sort of company to work for. This tends to stabilize the working force.
2. It gives protection to employees who could not obtain protection otherwise. Some may not be able to pass the physical examination required in regular life insurance.
3. It gives protection to those who could not afford to pay the usual premiums required for such protection.
4. Nursing care is frequently given by the insurance company under the group plan. A trained nurse upon request from the employer or employee goes to the employee’s home, co-operates with the attending physician, renders the necessary bedside care while present, and trains the members of the household in the proper method of caring for the patient between visits. Such nursing care and training is needed and appreciated by the average employee and his family. The employee recovers more readily, comes back to work sooner, and both mentally and physically is in better condition to do his share of production.
The number of companies sponsoring group life insurance for their workers has grown until it is estimated that 75 per cent of all large concerns have it, and the number of employees covered is in excess of 10 million. Starting with group life insurance, programs of employee protection have been broadened and liberalized until those of some progressive companies include weekly sickness and accident benefits, hospital benefits for the employee and his dependents, and retirement annuity benefits.
Protection for employees and their dependents in the event of illness or surgical care requiring hospitalization is provided through insurance companies or through nonprofit corporations organized for that particular purpose. The cost to the employee is small and may be paid by deductions from his pay every month.
Most companies encourage their employees to avail themselves of the opportunity to enroll in a group hospitalization plan, through membership in which they secure the means to pay unforeseen hospital expenses. Moreover, they are then assured of the immediate hospital care which is of utmost importance in the proper treatment of serious illness or injury. Together with hospitalization, medical plans are available which provide for medical consultation.