Group term life insurance policy refers to the insurance coverage that is provided to a group of people. Group term life insurance schemes offer financial independence to the concerned employee’s family in the event of death. It is intended to provide monetary guarantee to the beneficiary of the covered under the group term life insurance plan in the case of death of the insured.
Group term life insurance schemes have become a fundamental constituent in benefit packages presented to employees by employers. In fact, most fraternal providers offer group term life insurance to its members.
Life insurance is an essential product for persons who have financial dependents.
Who is Eligible for Group Term Life Insurance Policies?
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Group term life insurance policies are offered to the following sections of people-
- Employer-employee groups
- Non employer- employee groups
- Professional groups
- Non-banking financial institutions
- Microfinance institutions
There are many varieties of group term life insurance policies.
Following are some examples-
- Some plans may offer uniform covers to all of its members
- Some plans offer ranked covers for various grades of members
- Some schemes provide cover for outstanding housing loans, car loans, etc.
- Some schemes have riders like critical illness benefits, accident benefits, disability benefits, etc.
What is The Nature of a Group Term Life Insurance Policy?
Following is the nature of a group life insurance plan-
- It is awarded to all members of a certain group contingent on certain basic conditions of insurability
- Medical reports need not be produced
- Maturity value is not provided
- Scheme covers death
General Features of Various Group Insurance Schemes
Premium: Premium on group term insurance can be paid entirely by the employer.
Members under the scheme are also allowed to make contributions towards the premium of the scheme.
Double Accident benefits:- For an extra premium, double accident benefit is provided to the insured in the event of an accident.
This comes excluding the permanent disability benefit.
How does a Group Life Insurance Plan Work?
Following is the flowchart group life insurance plan-
- A group administrator is issued a master policy upon which he pays an initial premium.
- This initial payments covers all the members of the group for a tenure one year.
- An option to choose the sum assured is provided to the members of the group. This sum can either be a lump sum amount or could be linked to salary account or a loan account, etc.
- Once the policy holder has paid the premium, the members are covered for a tenure of one year from the date of commencement of the policy.
- The group life insurance plans are annually renewable.
- The premium is charged based on the alterations in the size and age allocation of the concerned age group.
What Are the Benefits of Group Term Life Insurance Schemes to Employers?
- Group term life insurance policies are beneficial to employers just as much as they benefit employees.
- Employers are aided in funding their gratuity liability with ease under the group term life insurance policies. Gratuity funds are built strategically to fulfil subsequent gratuity payments, thus, reducing the burden on the employer.
- Returns on the funds will be earned according to the performance of the funds chosen by the client.
- Group term life insurance policies in India are more economical because administering schemes on group basis has a lower cost.
- Funds that perform better will earn increased returns consequently decreasing the expense to the employer.
- Some plans offer employers with both life insurance covers along with gratuity benefits.
What Are the Benefits of a Group Term Insurance Plan to Employees?
Following are the benefits of a group term insurance plan to employees-
- Employees are assured of financial assistance being extended to their families in the unfortunate event of their demise, critical illness, etc.
- Employees can benefit from the inconvenience of medical tests be done away with until their free cover limits.
- The premiums paid by their employers are not treated as perquisites.
- Employees can enjoy death benefits that are exempt from tax under Section 10(10D)
- Easy administration by way of simple documentation
- Can be customised to meet niche needs of the employees enrolled
- Offers security to the family of the insured
- Safeguards the insured’s financial interest
Features of Group Term Life Insurance Plans
Group term life insurance schemes have a lot of attractive features which make them ideal for employee benefit packages. Following are few of the many features of group life insurance schemes-
- Members can be added at any point of the year
- A pre decided sum assured is paid to the beneficiary of the insured in the event of death
- Add on covers are provided as riders that insure for critical illnesses, accidental deaths, disabilities, etc.
- Application process is quick and easy
- The minimum size of the group is 50 members
- Terminal illness is provided as a built-in benefit
- Cheaper than individual policy cover
- Employees can enjoy the benefits they are entitled to while maintaining a healthy and strong connect with the employers
Frequently Asked Questions about Group Life Insurance Policies
- What is the minimum age for enrolling into a group term life insurance plan?
- What is the maximum age to enroll into a group term life insurance plan?
- What is the tenure of a group term life insurance plan?
- What is the minimum sum that is assured under the group term life insurance scheme?
The minimum age for enrolling into a group term life insurance plan is 18 years of age.
The maximum age to enroll into a group life insurance plan is 69 years.
The maximum age at the time of expiry of the policy is 70 years.
The tenure of a group term life insurance policy is 1 year.
The minimum sum that is assured under the group term life insurance scheme is Rs.1,000.
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