What Is Group Term Life Insurance?
Group Term Life Insurance is a term insurance plan designed to provide life cover to a group of people under a single master policy. Such plans can include employees of a company, NGO members, and borrowers of a lending institution. With this policy, you can benefit from a uniform or graded sum that is assured for all members and is cost-effective for the policyholder. It ensures financial protection to the nominee in case of the insured member’s untimely death during the policy term. Employers often use it as a valuable employee benefit.
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.
Benefits of Group Term Life Insurance Plans
Automatic Coverage for All Members
Group term life insurance provides life cover to all members simply by being part of the group.
Helps in Gratuity Management
Employers can use the group policy to build a fund for future gratuity payouts, making financial planning for employee benefits more structured and efficient.
Tax Benefits
You can enjoy the tax benefits with this policy. It is important to know that the death benefit you get under the policy is tax-free under Section 10(10D) of the Income Tax Act, 1961 subject to certain conditions.
Customisable Coverage
The plan can be customized with add-ons such as accidental death benefit, repatriation allowance, providing broader support beyond the base cover.
No Medical Tests Required
Under this policy, there is no need for any medical check-ups. This can be very helpful for you.
Cost-Effective Solution
Group plans are affordable, making them a budget-friendly option for both employers and members.
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.
Conclusion
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.
FAQs
What is the minimum sum assured under a group term life insurance plan?
In India, a group term life insurance plan typically offers minimum coverage that ranges from ₹10,000 per person. This amount can change depending on the insurer and the specific group involved. Many insurance companies offer flexible options, allowing employers or group administrators to choose a sum that meets their needs. However, the guaranteed amount can change depending on factors like the size of the group, the average age of its members, their occupations, and the terms agreed upon with the insurer.
Note:n case of EDLI, the minimum sum assured will be as per Employee’s Deposit Linked Insurance
Scheme, 1976, which would be amended in accordance to the Government directions from time to time
What is the maximum age to enroll in a group term life insurance plan?
The maximum age to enroll in a group term life insurance plan can be 79 years for EE (provided member is in active service on date of entry)& 69 years for NEE.
What is the minimum age required to join a group term life insurance plan?
You must be 14 years old to join a group term life insurance plan. This way, you can be sure that members are legally eligible and able to understand the insurance terms.
What is the tenure of a group term life insurance plan?
Group term life insurance has a 1 year term. The purpose of group term life insurance is to provide short-term life cover to members of an organization or group, with the option to renew annually. This flexibility allows employers or group administrators to revise terms or reissue the policy every year in light of current needs. Some special plans may offer longer than 1 year terms if required.
Should I buy separate term insurance if my employer provides group cover?
Yes, getting personal term insurance is a smart idea even if your employer offers group coverage. Group term insurance typically wraps up when you leave your job and might not provide enough coverage for your family's needs. On the other hand, a personal term plan puts you in the driver's seat, offering greater coverage and long-term protection. It's a smart way to secure your family's financial future, even after employment ends.
What is the death benefit in a group term life insurance plan?
The death benefit is the guaranteed amount that the insurer pays to the designated beneficiary if the insured individual passes away while the policy is active. This financial support can help the family navigate through difficult times. The benefit amount depends on the plan chosen and may be uniform or linked to the member’s salary or role in the organisation.
Is a medical test required to join a group term life insurance plan?
Usually, group term life insurance plans do not require a medical test for enrollment, especially for younger or healthy members. This makes it easy and hassle-free to get insured. However, the insurer may ask for a medical check-up if the coverage amount is very high or the member has known health risks. Always check the policy terms before joining.
Can I get money back on my group term life insurance plan?
Money-back benefits are typically not provided by group term life insurance. It is a pure protection plan that is intended to give your family financial support in case of any unforeseen circumstances.
Can I keep my group term insurance if I leave my job?
Usually, group term life insurance coverage ends once you leave the job or organisation. Some insurers may offer the option to convert the policy into an individual plan, but this is not guaranteed. If you want to continue your life cover after exiting the group, it’s a good idea to ask your employer or insurer about portability options.
Do group term life insurance plans offer maturity benefits?
No, group term life insurance policies don’t provide maturity benefits. They’re designed only as protection plans, which means they just pay out if the insured individual passes away during the term.
Are rider options available with group term life insurance?
Yes, many group term life insurance policies include optional riders. The most common riders include critical illness cover, accidental death benefit, and total permanent disability cover. They provide more scope of protection at a small cost, and you can generally tailor them to the group’s needs.
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