Group Insurance for Employees

Why employers choose it

• It gives insurance protection to every member of the group at a very affordable, minimum possible cost.
• Cover runs 24 hours a day, anywhere in the world.
• A sense of financial security among employees improves the working environment, which State Life says leads to higher productivity.
• In most cases an employer is legally required to provide insurance cover for employees. This plan helps meet that requirement.
• Premiums are tax-deductible for the employer.
• The total premium is lower than the combined premiums of separate individual policies for each person, because of savings in expenses.

Death benefit

If any insured member dies, the sum assured on their life is paid for the benefit of their surviving family.

This is paid however many members die, even if the total paid out exceeds the total premiums received under the policy.

Profit sharing

If State Life earns a net profit on a policy over any three-year period, part of that profit is passed on to the policyholder. The share depends on the total number of members in the scheme and can go up to 90% for large schemes.

Rider: PTD (Accident), permanent total disability from an accident

• Pays the sum assured if an accident causes permanent and total disability. This includes loss of two limbs, loss of both eyes, loss of hearing in both ears, or severe facial disfigurement.
• If the disability is permanent but not total, a percentage of the sum assured is paid, depending on how severe it is. The schedule of disabilities is the same one prescribed under the labour laws.
• If a temporary accidental disability keeps the member away from work, a fortnightly benefit is paid, calculated at Rs. 3,000 a month or the member's monthly salary, whichever is less.

Rider: ADB (accidental death benefit)

The death benefit of an insured member is doubled if the death was caused by an accident.

Rider: Natural Disability

Pays the sum assured if a permanent disability caused by disease or sickness leaves the member unable to follow any occupation or vocation for a living (gainful employment).

Rider: Critical Illness

Pays the rider sum assured if an employee gets one of the illnesses below while insured under this rider.

The member must survive at least 31 days after getting the illness to qualify. Some restrictions apply during the first two years of cover.

• Heart attack
• Coronary artery bypass surgery
• Stroke
• Cancer
• Kidney failure
• Major organ transplant, such as heart, kidney or liver

Suitable for

• Employers who want to give their employees financial security through insurance cover.
• Members of a professional body, association, welfare association or social club who want insurance protection on a collective basis.

Who takes part

• Participation is usually compulsory.
• If participation is voluntary, at least 75% of eligible employees must join.

Benefits

• Each employee is insured for an amount that may be flat or based on their designation or salary.
• The amount is paid on maturity, or on death if that happens earlier.
• In most cases each employee's term is set so the policy matures at or near their retirement date. The payout then arrives at retirement and adds to their retirement benefits.

Profit (bonus)

The policies are issued on a with-profits basis. The same bonus rates apply as for the matching individual endowment policies.

Premium rates

Premium rates are the same as for individual endowment policies. In group form, volume discounts also apply, depending on the size of the annual premium.

Surrender value

The policy acquires a surrender value (cash-in value) for a member once that member's cover has been in force for at least two years and no premiums are in default.

Loan facility

If a member needs cash and the policy has acquired a surrender value for them, they can take a loan of up to 80% of the net surrender value.

If an employee leaves

• They can surrender their policy for its net surrender value.
• Or they can continue their endowment cover in their own name, without evidence of good health, for the same sum assured and term they had during service.
• If they continue, the premium rates are those that normally apply to the same class of individual business.

Riders you can add

ADB (accidental death benefit), PTD (Accident) (permanent total disability from an accident) and NDB (natural disability benefit) can be added if wanted.

Suitable for

Employers who want to build a habit of saving among their employees as well as insure them against premature death.

Benefit scale in a typical scheme

Younger employees get a higher multiple of their fund balance because their average balance is smaller but their need for insurance is greater.

Death benefit

• If a member of the provident fund dies, their family receives a lump sum equal to the member's fund balance on the date of death, multiplied by a factor based on the member's age at death.
• The factors in the table are for a typical scheme. An employer may adjust them to suit its own needs.

Profit sharing

If the scheme has 200 or more members, the fund is also entitled to a share in the profits at the end of three years, depending on the size of the scheme.

Riders you can add

Any rider that can be added to Group Term Insurance can also be added to this plan, such as ADB (accidental death benefit), PTD (Accident) (permanent total disability from an accident), NDB (natural disability benefit) or Critical Illness cover.

How the cost is paid

• Neither the employer nor the employees pay an explicit premium. The cost is recovered from the annual investment return earned by the provident fund.
• In a typical case, a fund earning around 12% a year may earn about 11% or 11.5% a year once the scheme starts.
• State Life says the drop is so small that most employees do not notice it, while their families gain substantial insurance protection if the breadwinner dies.

Suitable for

• Any employer that runs a provident fund for its employees and wants to give them the maximum possible insurance cover.
• It especially suits employers who avoid higher cover under Group Term Insurance because they would have to pay for it themselves, or recover it from salaries, which some employees might object to.

Worked examples

For an employee whose pay is Rs. 2,000 a month:

Premium

Annual premiums are calculated from each employee's pay and age. They are payable at the beginning of each scheme year.

Profit commission

If the policy qualifies for profit commission (a share of the profit), it is paid in line with the rules at the end of 3 years.

Cover without medical evidence

Cover without medical evidence is allowed on the same basis as Group Term Insurance, with the monthly benefits converted into an equivalent lump sum.

The total of the benefits worked out this way must not exceed the maximum allowed under the policy.

Schools that can be covered

Registered private schools with at least 300 students are eligible.

Who is insured

• Fathers (aged below 60) of students in Nursery to class 10 are covered on a compulsory basis.
• If a student's father is not alive, the guardian may be covered, provided the guardian is not more than 60 years old.

Benefit

• If the father or guardian dies while the student is studying at the school, State Life pays the student's fee to the school.
• State Life also pays an additional annual grant equal to the school's annual fee, to cover the cost of books and uniforms.
• These payments are made every year until the student completes class 10.
• If the school's annual fee rises by more than 5% in any year, State Life counts the rise as 5% when working out the benefit.

Cost

• For the first year the cost is 6.00% of the school's total annual fee.
• The school pays the cost annually in advance.
• State Life reviews the cost each year.

Medical requirements

No medical is needed if the annual fee is equal to or less than the limit for the class level below. If the annual fee is higher, State Life decides whether a medical is needed.

Data the school provides

Within 3 months of the policy being issued, the school gives State Life the details of the fathers and guardians, such as name, date of birth, occupation and NIC number.

Claims

• The school lodges the claim as soon as possible on the prescribed form, with supporting documents such as the death certificate and a copy of the NIC.
• After the necessary verification, State Life starts paying the fee within the shortest possible time.

When cover ends

Cover ends on the earliest of these events:

• The contract between the school and State Life ends.
• The father or guardian reaches age 60.
• The student leaves the school.
• The school winds up.

Profit sharing

State Life evaluates the scheme every three years. If the scheme has made a profit for State Life, 100% of that profit is returned to the school. The profit is worked out as follows:

• Total cost paid or payable
• Less State Life's management expenses and contingency margin
• Less claims paid
• Less claims in process
• Less the present value of future payments on claims incurred and reported
• Less a provision for claims incurred but not reported

State Life's management expenses and contingency margin

This margin, as a percentage of the cost, depends on the average number of students covered during the profit commission period:

The contract

This is a brief of the scheme for the proposal stage. If a proposal is accepted, State Life and the school sign a detailed contract with all the details of the scheme.

Why lenders use it

• It protects employers and financial institutions against the risk that an indebted employee or client dies early.
• The family of a deceased borrower is often unable to repay the loan, especially if the borrower was the sole breadwinner. The cover assures the lender that it can recover its capital without causing hardship to the grieving family.
• It saves the lender the trouble of constantly monitoring delayed repayments in hardship cases caused by the unexpected death of a breadwinner.
• The lender may recover the premium from borrowers along with their loan instalments.

Benefit

• If an insured member dies, the total loan outstanding against them, including accumulated interest, is paid to the policyholder (the lender).
• If State Life earns a profit on a policy during a 3-year period, the policyholder is also entitled to a share in the profits, depending on the size of the group.

Riders you can add

PTD (Accident) (permanent total disability from an accident) and NDB (natural disability benefit) riders can be attached. They cover permanent disability from accidental or natural causes that leaves the member unable to earn a living for themselves and their family.

In such a case the riders help the lender recover the outstanding loan.

Suitable for

• Employers that lend to employees for house building, buying a vehicle (conveyance) or other household goods.
• Banks that lend to clients to buy a house or vehicle, or for a business venture.
• Leasing companies and other financial institutions with similar loan facilities.

Who can be covered

• Minimum age: 18
• Maximum age: 65

What it covers

The inpatient benefit (hospitalisation and day care) covers all medical expenses, up to the specified limit, while an insured person is in hospital because of illness, surgery, an operative procedure or an accident.

Plan features

• Cashless health cover across a vast network of hospitals
• Hassle-free service
• Peace of mind for employees

Brochure

State Life's page links to a Sehat Salamat brochure (PDF): https://statelife.com.pk/public/uploads/catalog/products/brochure/brochure_sehat-salamat_20240130104742.pdf

General FAQ: claims, nomination and policy records

State Life shows the same general policy questions and answers on every product page, including this one. Some of them describe individual policies rather than group schemes.

• Who receives a death claim: it is usually paid to the nominee, the assignee or the legal successor, as the case may be. If the policyholder made no nomination, assignment or will, it is paid to the holder of a succession certificate or other evidence of title from a court of law.
• Nomination and assignment: policy money due on the policyholder's death can be paid only to the person legally entitled to give State Life a valid discharge (receipt). If the policy has a nomination, the claim is paid to the nominee. If the policy is assigned, the assignee receives the claim.
• Assigning a policy automatically cancels any existing nomination. If the policy is later reassigned to the policyholder, a fresh nomination must be made.
• Lost policy document: losing or destroying the policy document does not remove State Life's duty to pay when a claim arises. The claim or sum insured is paid once the claimant or policyholder gives an indemnity bond jointly with two sureties.
• A policy can be surrendered even if the original document is lost. For a loan or a survival benefit you need a duplicate policy.
• A duplicate policy is issued after the normal formalities, such as a newspaper advertisement, and a nominal fee.
• Change of address: tell the zonal office that services your policy. Your policy records can be moved to the zonal office nearest your home. A correct address means better service and quicker claim settlement.

General FAQ: premiums, lapse, revival and changes

• Premiums are calculated mainly on four factors: the age of the person insured, the type of policy, the sum insured and the term of the policy.
• A policy lapses if the premium is not paid within the grace period after the due date. The grace period is one month for yearly, half-yearly and quarterly payments, and 15 days for monthly payments.
• A lapsed policy can be revived during the lifetime of the life insured, within 5 years from the due date of the first unpaid premium and before the maturity date.
• Revival is considered on a non-medical or medical basis, depending on the age of the life insured at revival and the amount to be revived.
• The policy document is the evidence of the contract. It cannot be altered unless both parties agree. State Life permits some alterations, keeping in view the basic principles of insurance and administrative convenience.
• As a rule, State Life does not permit alterations within the first year from the start of the policy.

General FAQ: policy loans

• Loans are currently granted up to 80% of the surrender value (cash-in value) on policies whose due premiums are fully paid.
• State Life currently charges 10% a year on policy loans. The page describes this as profit or return at 10% per annum compounded half-yearly, and says interest is payable half-yearly.
• Policyholders are eligible for a loan subject to certain rules and regulations.
• To apply, fill in the prescribed loan form and submit it with the policy document.
• You can repay the loan in part or in full at any time during the policy term.
• If the loan is not repaid during the term or before an early claim, the loan plus any profit or return is deducted from the claim money, and the balance is paid to the person making the claim.
• Can a policy be sold? The page says it is not possible to raise money against your life insurance policy, but a policy can be assigned or mortgaged once it has been in force for a minimum stipulated period.

General FAQ: automatic non-forfeiture options

These options protect a policy that has acquired a surrender value when a premium stays unpaid beyond the grace period. You get one of two options, depending on the choice made in your proposal, provided the surrender value is more than the total unpaid premiums plus any other amount owed to State Life.

You can choose the option when taking the policy or at any time later while it is in force. You can change it by writing to State Life and having the change endorsed on the policy, as long as no premium is unpaid beyond the grace period. If no option was chosen, the automatic paid-up option applies.

• Option A, automatic paid-up: the policy becomes a paid-up policy. No further premiums are payable, but the sum insured is reduced. The paid-up sum insured is specially calculated to clear all outstanding dues to State Life, and any bonuses already attached are taken into account.
• A paid-up policy gets no further bonuses. If the paid-up sum insured works out to less than Rs. 100, the policy is not made paid-up. It is treated as forfeited and loses all its benefits.
• A policy made paid-up this way may be revived for the full sum insured under the policy's revival condition (the page refers to it as condition No. 4).
• Option B, automatic premium loan: as long as the net surrender value equals or exceeds an unpaid premium, State Life keeps the policy in full force and treats the premium as paid by creating an automatic loan against the net surrender value.
• When the net surrender value falls below an unpaid premium, the policy stays in force for a further part period. That part period bears the same proportion to the full premium period as the net surrender value bears to the unpaid premium. When it ends, the policy is forfeited and loses all benefits.
• Profit or return is charged on an automatic premium loan at rates State Life sets from time to time. While any such loan and its profit is outstanding, any payment State Life receives is first used to reduce this debt.

General FAQ: insurance terms

• Life insurance is mainly seen as a saving instrument rather than an investment, because it builds compulsory savings while protecting the policyholder's family. It is the only saving instrument that also covers the life risk. A loan can also be taken against State Life policies.
• Life insurance moves the financial risk of an early death from the insured to the insurer. It helps a family meet short-term needs (for example, medical expenses) and long-term needs (for example, replacing lost income). State Life describes insurance as a hedge (protection against loss) rather than a true investment.
• Reinsurance: insurers spread risk by reinsuring the risks they have insured.
• Underwriting: weighing the material facts to decide whether to accept a risk and, if so, at what premium rate.