Everything To Know About Group Term Life Insurance
What Is Group Term Life Insurance?
If you are wondering about group term life insurance, read on.
The answer to the question of – "What is group term life insurance?" is that, it is a term life insurance for a group of people. They may be employees of an organisation, members of a society or a group of borrowers.
Group term life insurance comes under a single contract. If each individual of a group needs term life insurance, separate policies with different terms and conditions are needed but a group term plan comes under the same contract. There will be a Master Policyholder who will act as the central administrative machinery on behalf of the members.
Features of Group Term Life Insurance Plans
Some of the salient features of group-term life insurance plans are as follows –
- The policies are usually issued for a year. Once the coverage nears the maturity date, the policy can be renewed.
- Usually, pure-term insurance coverage is offered under group-term life insurance plans. On maturity, nothing is paid.
- Some plans might offer optional riders. If the group chooses the rider, an additional premium would be required.
- The premiums for group term plans are affordable and the policy also covers older individuals who might not be eligible for an individual term life insurance plan.
Who Is Eligible for Group Term Life Insurance Policies?
A group term life insurance policy can be taken by eligible groups for their members. Some groups which are eligible for the coverage are as follows –
● Employer-employee groups:
Employers can take a group term life insurance policy for their employees.
● Lender-borrower groups:
Credit institutions who offer loans can also take a group term life insurance policy on the life of their borrowers. Usually, in such cases, a credit life insurance policy is taken wherein the sum assured reduces in tandem with the reduced loan amount. If the borrower dies before repaying the outstanding loan, the benefit paid under the group term life insurance policy is used to repay the outstanding loan1.
Can you opt for another Term Insurance Plan Alongside the Group Plan?
Do note that you can also opt for an individual term life insurance policy alongside the group plan. This way, you can decide on a different maturity period so different phases of your life are covered. Sometimes, death benefits provided by a group policy may not be adequate to cover all the needs of your loved ones. In such a scenario, you could opt for an individual plan to make the death benefit substantial. Note that such policies exist only until you are part of the group and as per the conditions specified therein.
How Does a Group Life Insurance Plan Work?
When a group decides to opt for the group life insurance policy, it approaches the insurer and specifies its requirements. The insurer assesses the group’s composition and other details and then grants the coverage. Members who belong to the group get covered under the policy. A single policy is issued called the Master Policy, which insures all the members. Under employer-employee GTL policy, the sum assured of the members can be increased during the term of the policy, depending on the member’s position in the group, through an endorsement and with additional premiums.
The premium for the policy is collected from the group. It can be paid entirely by the group, its members or jointly by the group and its members. However, the insurance company collects a single premium from the group.
Thereafter, if the insured member passes away during the policy tenure, the sum assured is paid to the member’s nominee. The coverage for other members is not affected by payment of sum assured to the nominee of deceased. It continues till the policy tenure.
If a new member joins, he/she can be included in the policy at any time of the year, through an endorsement.
Group term life plans are convenient and you get the coverage and benefits of the policy if the organisation you are working for provides the same. They also offer tax benefits and comes with affordable premiums because of the presence of a group.
1. What is the minimum amount of sum assured coverage under the group term life insurance?
The minimum sum assured depends on the insurance company, the number of members to be covered, the type of group, the risks associated with the group, the average age of the members, etc. The insurance company underwrites the group’s risks and then determines the sum assured that it would offer.
2. What is the usual tenure of a group term life insurance plan?
Usually, group term life insurance plans are available for one year, after which they can be renewed.
3. What is the maximum age to enrol into a group term life insurance plan?
The maximum age depends on the insurance company offering the group life insurance plan. The age differs across different policies. So, check the maximum age criterion of the insurance company whose group life insurance policy your group is buying.
4. What is the minimum age needed in order to enrol in a group term life insurance plan?
The minimum age for enrolling into a group term life insurance plan depends on the insurance company. You should check the policy wording to know the minimum age.
1. https://www.insuranceinstituteofindia.com/downloads/IC38/ALEnglish.pdf (Page 144)
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