What is Group Term Life Insurance? 

What is Group Term Life Insurance? – An Overview 

A term life insurance plan ensures your protection for a specific term that can go up to 99 years, depending on the insurance product opted for. In case of an unfortunate demise of an individual during the policy tenure, his/her family gets the death benefit. In this way, term plans do not come with maturity benefits. 

In case, if you are a salaried individual, you can buy a group term life insurance plan provided by your employer or organization. 

Group Term Life Insurance, as the name signifies, refers to a policy offered by an organization to cover a group of individuals i.e., all their employees under a single contract. 

A group of people includes the employees of a company, society members, or a group of borrowers. Under this scheme, members of the group can get an annuity, life, gratuity, superannuation, loan cover, and leave encashment. This policy ensures that the future of your family is secure and safe as they will get a death benefit in case something unfortunate happens to you. Apart from providing financial security to the family of an employee, a group term life insurance plan also acts as an employee retention instrument in various large organizations.  

Moreover, if in case each employee of the company requires term life insurance, separate term policies with different T&Cs are required, however, a group term insurance comes under the same plan. There will be a master term insurance policyholder who acts as the central administrative body on the behalf of all the group members. 

Types of Group Term Insurance Plans 

The term insurance policy under which an individual is getting covered depends on the T&Cs decided between the insurer and the employer. 

• Some plans offer uniform coverage to all the group members 

• Some policies offer cover against outstanding loans such as home loans, car loans, etc. 

• Few plans offer special advantages to certain group members based on their grades or position in the company. 

• Some also offer the flexibility to buy riders such as accident benefits, critical illness, and disability benefits cover. 

Note: Now that you know that what is Group Term Life Insurance, you should also get to know about what is term insurance to buy a term plan for your loved ones.

Who is Eligible to Buy Group Term Insurance? 

The following group of people is eligible to get enrolled in group term life insurance plans: 

• Employee-Employer Groups 

• Banks 

• Non-employer-employee groups 

• Microfinance institutions 

• Non-banking financial institutions 

Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.

How Do Group Term Life Insurance Plans Work? 

First, a master plan is issued to an administrator of a group, for which he/she pays the 1st premium. This initial premium covers all of the members of a group for a year. Group members have the option of choosing the sum assured. This amount will be a one-time payment or associated with a loan account or salary. After paying the premium by the policyholder, the members are secured from the starting date of the year. The plans are renewable on yearly basis and the premium amount is determined by changes in the size and the distribution of age of the target age groups. 

Key Features of Group Term Insurance

As of now, we have discussed what is group term life insurance plan, but it is equally important to know its features for your easy understanding before buying it: 

• Employees are free to add any new member of their family under this policy at any point of time in a year.

• The process of application is quick and easy. You are required to submit an application form and complete all the KYC documentation processes. 

• The organization should have at least 50 members to buy term insurance.

Benefits of Group Term Life Insurance

Here are the benefits of a group term life insurance plan: 

• The family of the employees is assured of getting financial help in the unfortunate event and his/her untimely demise. 

• Based on the terms and conditions of the policy, the employees can undergo yearly health check-ups free of cost. 

• The received death benefits are exempted from tax u/s 10(10D) of the Income Tax Act, 196. 

• The documentation process of group term life insurance is quite simple and hassle-free. It offers financial security to the family of an employee. 

• The premium rates for a group term life insurance policy are low than an individual plan. The premium payment is also easy. The risk of missing out on payment of premium is minimal as it gets automatically deducted from your income. 

• If the group plan provides a gratuity advantage, the employees get gratuity benefits from the employer on completing a particular number of service years with the organization. Usually, the gratuity benefit is paid at the end of 5 years of service. 

• Under this policy, every member of the group, irrespective of their pay scale, receives life cover protection. A member gets covered automatically under the group plan. 

Is Group Term Life Insurance Coverage Enough? 

While a group term life insurance provides your loved ones the much-required financial security against the life uncertainties, you must be aware that the coverage is sometimes limited. You are also entitled to enjoy the group insurance benefits only till the time you are employed with the company. If you change your job or quit your current company, the group cover ceases to exist. 

So, even if an individual is covered under this policy, it is suggested to buy an individual plan so that he/she does not lack an insurance cover at any time in his/her life. Also, by purchasing an individual plan, one can receive a higher cover and customize the plan to suit the needs of their family. 

Wrapping It Up! 

Group term life insurance plans are convenient and you automatically get opted for them if the company you are working for offers the same. Such plans also ensure that you receive all the benefits of individual policies under a single cover. A group term plan also offers many benefits on tax and lower premium rates because of a presence of a group of people.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.