Group insurance
One insurance policy that covers a defined group of people together, such as the members of a society or professional association, or the employees of a particular employer.
In plain language
Most insurance is bought by one person for themselves or their family. Group insurance is different: one policy covers a whole group of people.
The booklet defines it as an "insurance policy that covers a defined group of people, for example the members of a society or professional association or the employees of a particular employer."
The key word is defined. The group is not "anyone who wants cover". It is a clear set of people: the employees of one company, the members of one housing society, the members of one professional body.
Many people have group cover through their employer without realising it. It is worth finding out what it covers, because it may not be enough on its own.
How it works
The basic insurance bargain (Chapter 6). Insurance is a promise of compensation for specific potential future losses in exchange for a periodic payment called a premium. The provider is the insurer; the person covered is the insured; the contract is the insurance policy, which states the conditions under which compensation is paid.
What makes it "group": the policy covers a defined group of people. The booklet's three examples:
| Group | Example |
|---|---|
| Members of a society | A cooperative housing society's residents |
| Members of a professional association | A bar association's advocates |
| Employees of a particular employer | Staff of one company |
How it compares with individual policies listed in the same chapter:
| Group insurance | Individual policies (term, endowment, health, etc.) | |
|---|---|---|
| Who is covered | A defined group | The person who buys it (and whoever the policy names) |
Individual choices still matter. Chapter 3 advises reviewing your financial plan regularly as circumstances change. Cover that comes from belonging to a group depends on staying in that group, so it should be checked against your family's needs.
Regulator. Insurance is regulated by IRDAI; grievances on a contract of insurance go to IRDAI, not SEBI.
A worked example
Names, amounts and policy terms are illustrative.
Sunrise Textiles, a factory in Surat, buys a group health insurance policy covering its 120 employees. Each employee is covered up to Rs 2,00,000 of medical expenses a year.
Imran, a machine operator, is admitted for surgery. The bill is Rs 1,65,000. Because he is part of the defined group (employees of this employer), the group policy pays it.
Imran's colleague Sheetal reviews her own position. Her family needs:
| Need | Amount |
|---|---|
| Health cover for her, her husband and two children | Rs 5,00,000 |
| Cover under the employer's group policy | Rs 2,00,000 |
| Gap | Rs 3,00,000 |
Gap = 5,00,000 − 2,00,000 = Rs 3,00,000
She buys an individual health insurance policy for the gap, so her family's cover no longer rests on her job alone.
A second group. Sheetal's housing society also arranges a group policy for its members. She is covered there as a member of a society, the booklet's other example of a defined group.
Why NISM asks about it
Chapter 6 (Insurance Related Products) lists group insurance among the types of insurance policy, with its definition and examples, and describes IRDAI's role. Expect: "a policy covering the employees of a particular employer is called?" (group insurance) and "which of the following is an example of a defined group?"
Common exam traps
- Group insurance covers a defined group, not the general public.
- The booklet's examples are society members, professional association members and employees of a particular employer.
- It is a type of policy by who is covered, not by what is covered; a group policy could be for health, life or another risk.
- Group cover is not a substitute for checking your own family's needs.
- Grievances on insurance contracts go to IRDAI.
Where this is taught
- Series X-B · Chapter 2: Features of Life Insurance Productsintroduced here
- Series SEBI-ICE · Chapter 6: Insurance Related Productsintroduced here
Related terms
- IRDAIThe Insurance Regulatory and Development Authority of India, the regulator of India's insurance sector. It protects policyholders' interests and handles grievances on insurance contracts and ULIPs.
- InsuranceThe risk-management approach that pays an explicit upfront premium to remove the downside while keeping the upside — which in derivatives means buying an option rather than selling a future.
- Property insuranceInsurance that pays the owner or renter of a building back for damage to, or theft of, the building and its contents. Includes homeowner's, renters, flood and earthquake insurance.
- Term insuranceLife cover for a fixed period: if you die during the term your nominee receives the sum assured, and if you survive it nothing is paid back. It is the cheapest way to buy protection.
- Financial planningThe process of estimating what a person will need money for across their lifetime and building an investment plan to meet each of those needs — savings with a purpose attached.
- Health insuranceInsurance that covers an insured person's medical and surgical expenses, regulated in India by the Insurance Regulatory and Development Authority of India (IRDAI).