Need for revising CGEGIS (Group Insurance)

   Central Government Employees’ Group Insurance Scheme (CGEGIS) is the only Life insurance cover sponsored by Central Government as of now for its employees.

   It came into force from 1st  January,1982, and provides employees either the life insurance  cover in the case of death during service or a maturity amount  in the case of retirement from service. A portion of the subscription is  credited to Insurance Fund and the other portion to the Savings  Fund in the ratio of 3:7. The Savings Fund will earn interest at  the prescribed rate to be compounded quarterly. Monthly subscription, life  insurance sum assured and Maturity amount applicable for  different cadres are as follows

Employee Cadre	Contribution per Month (Rs.)	Insurance cover (Rs.)
A	120	1,20,000
B	60	60,000
C	30	30,000
D	15	15,000

Features of this Scheme:

• On Resignation/Retirement :- Amount of subscription
  credited to the Savings Fund along with interest thereon
  will be paid to the employee.
• On Death :
  Amount of insurance cover of the group to which he belongs
  on the date of death and the accumulation in Savings Fund
  will be paid to his nominee/heirs.
• If an employee dies before
  he was enrolled as a member (i.e. between the date of his
  joining service and the following Ist January), only the
  insurance amount will be paid to the nominee/heirs.
• Employee can assign the
  insurance cover and accumulation in the savings fund to a
  recognized financial institution, for obtaining housing
  loans. However, no loans/advance or withdrawals are
  permitted from Insurance Fund/Savings Fund.
• The amount of subscription
  is eligible for Income Tax Rebate u/s 88 of IT Act.

 

The maximum sum  assured in the event of death in this scheme is Rs.1,20,000.  Remember, this amount is applicable for Group A Officers only.  Group B, C and D Officers are entitled for a sum assured to the  extent of Rs.60,000, 30,000, and Rs. 15,000 respectively. Can we stoutly say our life is  sufficiently covered under CGEGIS with this meager insurance  amount? One of the basic personal finance principles as far as
Insurance concerned is under-insurance at times leaves no trace  of insurance when it fails to serve the purpose for what it was  effected.

   This is because insurance on Human Life should be  sought keeping in mind, the financial loss that the family would  suffer in the absence of insured person. One might ask why Central  Government Employees should depend on Group Insurance Scheme (CGEGIS)  when he is not barred from insuring his life on his own by
opting for insurance policies offered by LIC or other private  Insurance Companies. But, wise men would always  advocate in favour of Group Insurance only because of the  advantages of getting insured as a group. Especially, Group  insurance plans have low premiums. Such plans are particularly  beneficial to those for whom other regular policies are a  costlier proposition.

   Moreover, Group Insurance  Premiums are based on head count of the group insured.  Obviously, When the group sought to be insured is having more  number of employees premium collected per employee would get  substantially reduced. The real advantage of Group  Insurance that More Insurance Cover a lesser premium can be  enjoyed by the employees if Government reviews the existing  CGEGIS and makes some small changes such as providing enhanced  Insurance cover after reasonably increasing the premium per  head. 

   To commensurate with the present  inflationary trend, a reasonable minimum Insurance cover under  CGEGIS has to be fixed, say Rs.5 lakhs. From the employees side,  justifiable increase in the premium by the government for  providing adequate insurance cover should readily be accepted as  the premium we pay for the existing Group Insurance is very  negligible. 

   Government can not provide a decent insurance cover  with the such a small premium we pay now. Under the existing CGEGIS the  premia is Rs.10 per month for Rs.10,000 sum assured. This rate  is more or less equivalent to the rate of premia for the sum  assured pertaining to Group Savings Linked Insurance Scheme
offered by LIC of India. But the major difference is Life  Insurance cover offered by LIC under this Group Insurance Scheme  is considerably higher. Hence, the Group Insurance offered by  LIC could be taken as a benchmark for revising CGEGIS.

   To conclude, there is an  immediate need in revising CGEGIS to provide for more insurance  cover as the existing scheme was devised almost 30 years back  after which three pay commissions were formed by Government for  revision of salary and allowances.