In Pakistan, group life insurance is a core part of employee benefit packages, especially in medium to large-sized companies. It is an effective tool for employers, helping them offer a financial safety net to employees’ families in the case of an employee’s untimely death. It can be a useful tool for providing peace of mind to both employees and employers.
But exactly how does the Pakistani law operate regarding group life insurance? What are employee rights and employer obligations?
What Is Group Life Insurance?
It is a single insurance policy for a group of people, employees of a company, or members of an organization. Instead of each person getting an individual policy, the employer or group sponsor is issued one master contract.
Term life coverage is the most common form of this insurance in Pakistan. If an employee passes away during the policy period, it provides death benefits to the employee’s nominated beneficiaries.
Advantages of Offering Group Life Insurance
There are a lot of benefits of offering Group Life Insurance for both employees and employers.
For employees, it offers the obvious financial protection for their families in the event of an untimely death and gives them peace of mind for their family’s future at no personal cost.
For employers, offering Group Life Insurance can be a useful tool to attract and retain top talent. It also demonstrates a strong underlying commitment to employee well-being and fosters a more loyal and engaged workforce.
Additionally, group policies are typically more cost-effective and easier to manage than individual plans, making them a smart addition to a comprehensive employee benefits package.
To learn in detail about why Group Life Insurance is a win–win for both parties, read our blog Maximizing Benefits for Both Employers and Employees with Group Term Life Insurance.
Is Group Life Insurance Mandatory in Pakistan?
No law in Pakistan mandates private sector employers to provide group life insurance to their employees.
However, certain sectors may be required to offer such benefits due to
- Contractual obligations
- Corporate HR policies
- Collective bargaining agreements
- Statutory requirements for regulated industries
Many organizations, however, offer this service as part of their strategy to improve retention, job satisfaction, and competitiveness.
Legal Framework Governing Group Life Insurance in Pakistan
In Pakistan, group life insurance falls under the insurance regulatory framework, governed by 3 key bodies:
1. Insurance Ordinance 2000
This ordinance is the main law regulating insurance companies in Pakistan. It sets operational standards for life insurers who issue group policies.
2. Security and Exchange Commission of Pakistan (SECP) Regulations
SECP is the main regulatory body overseeing insurance providers. All group life policies must be issued by SECP-licensed insurers and comply with the rules laid out in the Corporate Insurance Guidelines.
3. Labor Laws
Pakistan’s labor laws don’t mandate group life insurance, but some companies still offer it to comply with best industry practices.
In contrast, state sector employees are often covered using statutory group life insurance schemes.
To learn more about the benefits of offering group life insurance, visit our post on the Benefits of Group Life Insurance for a Company.
Key Features of Group Life Insurance Policies in Pakistan
While exact terms may vary between companies and organizations, group life policies in Pakistan include:
- Fixed Sum Assured: linked to basic salary (e.g., 24 or 36 times the monthly basic pay)
- Premium Paid by Employer: Usually, 100% of the premium is borne by the employer.
- Death Benefit Only: Standard group life policies are term-based and pay out only in case of death, not for retirement or resignation.
- Accidental Death & Disability Riders: Many employers also opt for add-ons to cover death or permanent disability due to accidents.
- No Medical Checkup Required: For group enrollment, employees are usually covered without a health check unless opting for extra voluntary coverage.
Employer Responsibilities
While this is not a legal obligation, employers offering group life insurance have to meet certain expectations.
Convey Coverage Details
Employees should be informed in writing about the sum assured, policy limitations, and exceptions, etc.
Timely Payment of Premiums
Delayed or decreased premiums invalidate coverage, and timely payment to the insurer is necessary.
Professional Claim Handling
In the event of an employee’s death, employers not only have to deal with insurers professionally, but also with the employee’s family, with care and compassion required in such a delicate situation.
Maintaining Employee Data
Policies require correct information about employee age, designation, and coverage amount. This data should be regularly updated.
For a deeper dive into common misconceptions around offering group life insurance, like it being too expensive, visit our piece, Top Myths About Group Life Insurance: What Employers Need to Know.
Employee Rights and Other Considerations
Employees under a group life insurance plan should be aware of:
- Nomination Rights: Employees have the right to nominate beneficiaries and update them as needed.
- Non-Portability: Coverage typically ends when the employee resigns, retires, or is terminated.
- No Cash Value: Since most group policies are term-based, they do not have a maturity value or surrender benefit.
- Right to Information: Employees can request details of their coverage from HR at any time.
Claims Process in Case of Death
The group life insurance claim process in Pakistan is generally straightforward.
- Employer notifies the insurer:
HR or admin submits a formal intimation with supporting documents.
- Document Submission:
Required documents like the original death certificate, CNIC of the deceased and the nominee, the nominee’s bank details, and the employer’s confirmation letter, along with the post-mortem report in the case of accidental death, need to be submitted.
- Claim Settlement:
Most insurers settle valid claims within 7-14 working days after receiving all documents.
Potential Scope
While group life insurance is certainly not compulsory under Pakistani law, it is becoming an important part of a modern employee benefits package. Employers who opt to offer this not only build trust and loyalty but also reduce the financial vulnerability of their teams.
And let’s not forget the immense benefits offered to career professionals and business owners. It is a core tool in ensuring a more secure and healthy working relationship between employers and employees.
Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.
