Group life insurance in the Philippines, explained

Group life insurance is one master policy that covers a group of employees. If a covered employee dies, the insurer pays a set amount to the beneficiary the employee named. Many group policies also pay if an employee becomes totally and permanently disabled. The employer usually pays the premium, and the cover lasts while the person is employed.

How it works

• Master policy and certificates. The employer holds the master policy. Each employee gets a certificate that shows their amount of cover and their beneficiary.
• How the amount is set. The sum assured is set by a rule that applies to everyone, for example a flat amount for all staff, an amount by job level, or a multiple of each employee’s salary.
• Beneficiaries. Each employee names their own beneficiaries, and can usually change them.
• When cover ends. Cover usually ends when the employee leaves the company, retires, or reaches the policy’s top age, or if the employer stops the policy.
• Required provisions. The Insurance Code lists provisions every group life policy issued in the Philippines must contain (Sec. 234), separate from the rules for individual policies (Sec. 233). They include a grace period of 30 days or one month for premiums, during which the death cover stays in force (Sec. 234(a)), and the right to convert on leaving (below).

Common add-ons seen in policies

These are terms you will see in group policies. Whether a policy has them depends on the policy.

• Accidental death benefit. An extra amount if death is caused by an accident.
• Total and permanent disability. Pays if an employee becomes totally and permanently unable to work, as the policy defines it.

Converting your cover when you leave

The right to convert is one of the provisions a group life policy must contain. An employee whose cover ends because they left the group can take an individual life policy without proving good health, if they apply and pay the first premium within 30 days after leaving (Insurance Code Sec. 234(h)). The policy states the conditions.

Group life, HMO and individual life side by side

Scroll the table sideways for more

These describe how each kind usually works. A given policy can differ.

Questions to ask an insurer

1. Health questions. Up to what amount is cover given without health questions, and above what amount must an employee answer them?
2. Actively at work. Must an employee be at work, not on sick leave, on the day cover starts?
3. Exclusions. What is not covered, such as some causes of death or some jobs?
4. The contestability period. For group life, the validity of the policy cannot be contested, except for non-payment of premiums, after it has been in force for two years from its date of issue (Insurance Code Sec. 234(b)). Ask how this applies to an employee’s own cover and to amounts above the no-questions limit.
5. Who is eligible and from when: regular employees only, or probationary staff too?
6. How claims are filed and what papers a family needs.

Before you sign, check that the insurer holds a certificate of authority on the Insurance Commission’s list of life and non-life insurers.

Tax and payroll points

The cost of premiums an employer pays for the group insurance of its employees is left out of fringe benefit tax (BIR Revenue Regulations 3-98, Sec. 2.33(B)(10)), and fringe benefit tax is not imposed on an employer’s contributions to insurance plans for employees (NIRC Sec. 33(C)(2); RR 3-98 Sec. 2.33(C)(2)). Being outside fringe benefit tax does not settle income tax: BIR’s rules say a benefit exempt from fringe benefit tax may still form part of the employee’s taxable pay (RR 3-98, Sec. 2.33(C)). How the premiums are treated for the company’s own income tax and for each employee’s pay depends on your situation. Check with your accountant or Revenue District Office.

For the other benefits employers add, see employee benefits in the Philippines.

For health cover for staff, see HMO for a small business.

This page explains how group life insurance generally works. It does not describe any company’s product, and it is not tax advice.