CHAPTER 10 GROUP INSURANCES. Group Insurance—An Introduction. Provides Insurance Cover to large number of individuals. Single policy known as Master policy. Contract is between the Insurer and Representative of group. May be Employer—Employee Group. May be Association—member group.
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In a salary savings scheme policy the ownership remains with the policy holder and the life cover and terms are decided between him and insurer.
i) Pay as and when due, not a prudent business practice as amount can vary from year to year based on age profile of his employees .
ii) Create internal reserve. Better method, but reserve funds may be used for other purpose in case of business emergency.
iii) Set up a gratuity fund and create a trust to administer the funds.
(a) Trustees hand over funds to the insurer who has better capabilities of managing the funds.
(b) There will be an insurance cover to provide additional funds for those who die young.
(a) easier administration
(b) Availability of Actuarial and Investment Expertise.
(c) Better benefits for those who die young may be provided.
(i) Fix the contribution from the employer as a percentage of salary. Benefit available to the employees would be equal to what this contribution can buy.
(ii) Benefit to be given to employees is fixed and appropriate contribution is collected. Normally benefit will be fixed to a fixed proportion of final salary drawn.