Provident Fund Insurance Scheme

Group Provident Fund Insurance Scheme provides life insurance coverage to the members of the provident fund scheme of an employer. The amount of coverage of each member depends upon his age and the amount of his provident fund balance at any time.

What Need Does It Fulfill?

Young employees normally have short service to their credit and consequently their Provident Fund balance is also quite meager. In case of unfortunate death of such a person the provident fund amount is not adequate for meeting the financial needs of the family such as schooling of the children, their marriage expenses and housing accommodation. Group Provident Fund Insurance Scheme is specially designed to meet such an eventually since the benefits under the scheme are on a sliding scale.

The benefits under a typical scheme are as follows:-

Age Bracket Benefit
18 30 4 times the fund balance.
31 40 3 times the fund balance.
41 50 2 times the fund balance.
51 55 1 time the fund balance.
56 59 1/2 time the fund balance.

The younger employees enjoy a higher multiple of the fund balance since the average amount of their fund balance is smaller but their requirement for insurance is greater.

Benefits of Group Provident Fund Insurance Scheme

On the death of any member of the provident fund scheme his family is paid a lump sum amount equal to the amount of his fund balance on the date of his death multiplied by a factor depending upon the age of the employee at death. The factors applicable for a typical scheme are already given above however the employer in a particular case may adjust these factors to suit his own special requirements.

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

What riders can be added?

Any rider which can be added with group term insurance plan can also be added with this plan such ADB, PTD (Accident), NDB or Critical Illness Cover.

Suitable for..

The plan is suitable for any employer who maintains a provident fund scheme for his employees and who appreciates the benefits of providing the maximum possible insurance coverage to his employees. Some employers may appreciate the benefits of group insurance but they may avoid higher coverage under their group term insurance policy since the cost of this coverage would either have to be borne by them or if they recover the cost from the salaries of their employees then some of the employees might object to it.

For such employers this scheme is very suitable since it does not require any explicit premium contribution from the employer or the employees, instead the cost of the scheme is recovered from the annual investment return earned by the provident fund. In a typical case, if a fund is earning a return of around 12% per annum, then with the introduction of this scheme, this return may reduce to about 11 or 11.5 % per annum. This decrease is so small that most of the employees do not even feel it but by virtue of it their families could enjoy a handsome insurance protection against any misfortune striking the breadwinner of the family.