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Group Life Insurance – Everything you need to Know

Group Life Insurance – What is it all about?

Group Life Insurance – Everything you need to Know


Aug 18, 2021

By : Bajaj Allianz Life

There are many different types of life insurance policies out there. While some like term insurance are designed to offer pure protection, others like endowment plans also give you the option to create wealth. Although most life insurance policies are designed for and directed towards an individual, there’s one that’s not - group life insurance. Want to know more? Continue reading to find out all about group life insurance. That said, before we actually get to it, let’s first quickly take a look at the concept of life insurance.


What is life insurance?


Life Insurance is nothing but a contract that an individual enters into with an insurance provider. Here, the individual agrees to pay a certain sum of money regularly to the insurer in the form of premiums. In return for the premiums, the insurer agrees to provide a life cover to the said individual for a specific period of time, known as the policy tenure.

Now, if the individual dies during the policy tenure, the insurer is obligated to pay the nominee of the deceased individual a predetermined sum of money. This sum is known as the death benefit and can be completely customized by the individual at the time of purchase according to their needs and requirements.


What is group life insurance?


Now that we’ve refreshed your memory, let’s move on to take a look at group life insurance policy.

As the name itself implies, a group life insurance plan is designed to cover a group of individuals. It is basically a life insurance policy for a group, instead of just a single person. Generally, group life insurance plans are purchased either by companies, associations, or societies to provide their employees or members with life insurance coverage.


How group life insurance works?


Although group life insurance is similar to a regular life insurance policy, it differs in certain areas.

For instance, in the case of a company, a group life insurance is taken by the employer to offer life insurance coverage to its employees. And so, the premium for the same is paid for by the employer themselves. However, in some cases, a part of the premium is shared between the employee and the employer as well.

Secondly, in a group life insurance plan, the employer decides the death benefit sum assured for each employee. The death benefit is usually based on the salary of the employee. In some group plans, employees are given the option to increase their coverage. But doing so, may lead to an increase in the premiums, which has to be borne by the employee.

And finally, an employee under a group life plan is only covered till they are in employment with the company. The coverage ceases automatically as soon as they retire or resign from the organization. Furthermore, if an employee dies while they’re still employed with the company, the death benefit sum assured is automatically paid out to nominee of the employee.


Features of group life insurance


Now that you’re aware of what a group life policy is, here’s an overview of the various features that it comes with.


1. Single contract for the entire group:


Irrespective of the number of beneficiaries in a group life insurance policy, the governing contract is known as the “Master Policy” which is a singular contract entered into with the Master Policy Holder (MPH). The MPH is thereafter the administrator of the group, who co-ordinates with the insurer in respect of enrollment and claims of members. The Insurer, depending on the type of group policy, would also issue a Certificate of Insurance to individual members which document is a subordinate document to the Master Policy.


2. Option to add riders:


Some group life plans give the organization the ability to add riders to enhance the life insurance coverage even further. With the help of add-ons such as critical illness riders, accidental death and disability riders, and waiver of premium riders, among others, organizations can increase the total death benefit sum assured payout.


3. Easy claim process:


Lodging a claim under a group life insurance plan is extremely easy. All of the concerned individuals under the plan are provided a certificate of insurance. In the event of the death of any one individual, all that the family needs to do is notify the organization and submit the necessary documents.


4. Offers tax benefits:


A group life insurance plan offers multiple tax benefits. If an employee contributes towards the premium for the plan, they can claim the premiums paid as deductions under section 80C of the Income Tax Act, 1961 to reduce their overall tax liability. Also, the death benefit payout that goes towards their family upon their death is also completely exempt from taxation under section 10(10D) of the Income Tax Act, 1961. The deductions and exemptions are subject to the provisions mentioned under Income Tax Act 1961.




Among the different types of life insurance policies, group life insurance is the only one that offers benefits for both the beneficiaries and the organization. That said, a group insurance plan may not always be enough to provide your family with adequate life insurance coverage. In that case, you may also purchase a separate life insurance policy, just in case. It is important to evaluate your needs and take a call accordingly.


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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.