Group insurance is an insurance that covers a group of people, for example the members of a society or professional association, or the employees of a particular employer for the purpose of taking insurance. Group coverage can help reduce the problem of adverse selection by creating a pool of people eligible to purchase insurance who belong to the group for reasons other than the wish to buy insurance. Grouping individuals together allows insurance companies to give lower rates to companies, "Providing large volume of business to insurance companies gives us greater bargaining power for clients, resulting in cheaper group rates." The concept varies internationally, with distinct practices and benefits in different countries, such as Canada and India. Additionally, group insurance policies can be either compulsory or voluntary, each with specific underwriting requirements and implications for coverage and premiums.
Overview and benefits of group insurance
Group insurance may offer life insurance, health insurance, and/or some other types of personal insurance.
Characteristics of group insurance
Investopedia defines group life insurance as "Life insurance offered by an employer or large-scale entity (i.e. association or labor organization) to its workers or members. " Group life insurance is typically offered as a piece of a larger employer or membership benefit package. By purchasing coverage through a provider on a 'wholesale' basis for its members, the coverage costs each individual worker/member much less than the purchase of an individual policy. People who elect coverage through the group policy receive a 'certificate of credible coverage' useful in obtaining subsequent coverage, if necessary from another insurance.
Thus we can infer the following characteristics of group life insurance, which also apply to other group insurances:
