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Benefits Of Group Term Life Insurance Plans


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Sep 22, 2022

By : Bajaj Allianz Life

A term life insurance policy helps you secure your family’s financial future in the case of any unforeseen contingency. The plan provides financial assistance to your family in your absence, helping them maintain their lifestyle and also fulfilling their financial goals.

When it comes to term insurance plans, some common type of policies available based on the number of individuals insured are -

  • individual term insurance plans for yourself, your spouse or dependent children. The plan insures one individual under the policy and hence called so.
  • Business partners can buy term plan for each other as they have insurable interest1 on each other’s lives.
  • Joint term insurance plans wherein two or more individuals are insured under the same policy. These plans are usually available for a married couple.
  • Group term insurance plans cover a group of individuals under a single policy.

Group term insurance plans are those which provide coverage to all the members insured under the group insurance scheme at affordable rates. Let’s understand what these plans are all about and their benefits.

 

What is a group term life insurance policy?

 

Term Life Insurance covers the life of the person insured and provides financial benefit to the nominee in case of the unfortunate demise of the person insured. When such life coverage is provided to a Group of people under a single policy (called Master Policy), it is called Group Term Life (GTL) Insurance Plan.

Group Insurance implies one contract covering a group of lives. The Group should be reasonably homogeneous by nature of occupation so that it can be properly treated as a single unit, and it must not be formed mainly for the purpose of obtaining insurance. The terms on which insurance cover is granted depend upon the characteristics of the group as a whole and same term is applicable for all the members of the Group.

A single Master Policy is issued incorporating the contract between the insurance company and a legal entity like Employer, Trustees, Association etc., defining the group of lives to be covered, benefits, contributions and terms and conditions on which the contract is entered into.

Some of the salient features of group term plans are as follows –

  • The policy is available for registered groups. For instance, employer-employee groups, banks and their accountholders, unions, trusts, etc.
  • The policy is issued for a year, after which it can be renewed
  • The premium of the policy can be paid by the group or by its members, as decided in the scheme of the Master Policy,
  • The sum assured depends on the age, income or hierarchy of the members in the group. Alternatively, the group can opt for a uniform sum assured for all its members

 

Group term insurance benefits

 

Now that you know what the plan is all about, here’s a look at the group term insurance benefits –

1. Easy coverage availability

One of the main benefits of a group term plan is its easy availability. You get the coverage simply by virtue of being a member of the group that has taken in the policy. For instance, if your employer has bought the group term plan for its employees and you are one such employee, you would get automatic coverage under the plan subject to meeting the eligibility criteria.

2. Affordable premiums

As premium is calculated considering the whole group, premium becomes cheaper than the premium of an individual term-insurance policy.

Also, if the premium is paid by the group master policyholder for the coverage of its members, e.g., Employer-Employee Group, individual members need not to pay for the insurance coverage.

This affordable premium makes group plans beneficial for their members.

3. Tax benefits

If you pay the premium for the group term plan, you can claim a deduction under Section 80C of the Income Tax Act, 1961 on the premium paid as per provisions stated therein. The death benefit received from the policy is completely tax-free too under Section 10(10D) of Income Tax Act, 1961. So, besides providing coverage, group term plans also allow tax benefits.

Moreover, there are term insurance benefits for the group itself. Here’s how –

  • It may help in boosting morale among the group members and foster loyalty.
  • Groups can claim premium paid as an expense in their tax returns
  • Employers may consider attracting and retaining talented employees by securing employees’ finances with a group term insurance plan.
  • As employees’ financial concerns are taken care of, they can devote their focus to work. This may help boost productivity.

Things to remember

Though group term life insurance plans have their share of benefits, here are a few aspects of the coverage that you should know about –

  • The coverage is available till you are a part of the group or till the group decides to keep the coverage active.
  • You cannot choose the sum assured that you want.

Even if you have a group term cover, it is prudent to opt for an individual term plan too. The individual plan can be customised as per your coverage needs to a large extent, and you would have control over it.

So, to enjoy several other term insurance plan benefits, you may consider opting for an individual plan, too, besides any group coverage that you have. Use the term insurance calculator to find out the suitable coverage and supplement the shortfall with an independent policy for complete financial security.

Source

1http://www.careerinlicagency.com/downloads/IC-33%20English%20full.pdf

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3Discount is available for regular premium and limited premium payment frequency under all variants of this product.

2Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | medical rates | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

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. 

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.