What Is Group Term Life Insurance: An Overview Guide

  • postauthorEditorial Staff
  • postdateMay 22, 2024
  • postreadtime10 min read
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Group Term Life Insurance

Life insurance is an essential financial product that provides a safety net for your loved ones in the event of your untimely demise. While individual life insurance policies are widely known, group term life insurance is an increasingly popular option for employees and businesses alike.

In this comprehensive guide, we delve into the intricacies of group term life insurance, exploring its features, benefits, and considerations to help you make an informed decision.

In India, group term life insurance is a popular option for employers looking to provide life insurance coverage to their employees.

What is Group Term Life Insurance?

Group term life insurance is a type of life insurance offered to employees by the employer as part of their employee benefits package. It provides a lump sum payout to the designated beneficiaries in case an enrolled employee passes away during the coverage period.

Unlike individual life insurance plans, a group term life insurance cover is typically more affordable and does not require individual underwriting, making the group term life insurance benefits accessible to a broader pool of employees.

In countries such as India, this plan is a common offering from employers as part of their employee compensation and welfare initiatives.

Also, Read: Group Health Insurance for Employees

How Does Group Term Life Insurance Work?

Group term life insurance is a type of insurance plan that operates on a group policy basis where the employer negotiates the terms with an insurance provider, and eligible employees are enrolled.

The employer often covers the premiums, making it cost-effective for the entire group of employees. The coverage amount is usually linked to the employee’s salary or a fixed amount, and the policy remains active as long as the employee is employed or until the policy expires.

It is a common employee benefit provided by many employers, with the option for additional coverage through payroll deductions. The coverage amount and availability can vary from employer to employer, with benefits or sum assured tailored to meet the income levels of different employees within the organization.

Also, Read: Types of Health Insurance

Who Should Buy Group Term Life Insurance?

Group term life insurance is often purchased by businesses for their employees, but it can also be purchased by non-employer employee groups, like associations, organisations, and non-banking financial institutions. These plans are more affordable than individual life insurance policies, and it may offer guaranteed acceptance, meaning that individuals cannot be denied coverage based on their health.

Group term life insurance is particularly beneficial for employees with pre-existing medical conditions, and those with high-risk occupations or hobbies. It provides life insurance coverage without the need for individual underwriting, which can otherwise be difficult for individuals with health issues or high-risk jobs to obtain.

Suggested Read: Group Health Insurance for Small Businesses

Who Is Eligible for Group Term Life Insurance Policies?

Eligibility for group term life insurance policies is typically determined by the employer and the insurance provider. In most cases, full-time employees are automatically eligible for coverage if they meet the employment requirements, such as fulfilling the probationary period.

Part-time employees, contract workers, and retirees may also be eligible, depending on the employer’s policy and the insurance provider’s guidelines.

According to a study, life insurance is available to 57% of private company employees and 83% of government employees through their workplace. In India, group term life insurance is also a popular option for employers looking to provide life insurance coverage to their employees, with 46% of companies offering group term life insurance as an employee benefit paid by the employer.

Also, Read: What is Employer Employee Insurance?

Key Features of Group Term Life Insurance Plans

Group Term Life Insurance Policies come with several noteworthy features:

1. Affordable premiums

The premium for this insurance cover is typically lower than those for individual or retail life insurance policies. This cost advantage arises due to the risk being spread among a large group of employees and reduced administrative expenses.

2. Guaranteed coverage

Most Group Term Life Insurance Plans do not require extensive individual underwriting, ensuring that the benefits are accessible to employees regardless of their current health status. This could, however, vary if the average age of employees in the organisation is on the higher side.

3. Flexible coverage options

Employers can structure the Group Term Life Insurance Policy with varying coverage levels based on factors like an employee’s salary, designation, or tenure with the company.

4. Portability

Some Group Term Life Insurance Plans in India allow employees to convert their group coverage to an individual policy if they leave the company, ensuring continuity of life insurance protection. It’s advisable to check the same with the insurer before purchasing or zeroing in on a plan.

5. Additional benefits

Many Group Term Life Insurance Policies incorporate additional benefits such as accidental death and dismemberment (AD&D) coverage, waiver of premium provisions, and accelerated death benefits, enhancing the overall value proposition.

Also, Read: Waiting Period in Health Insurance

Group Term Life Insurance Benefits for Employees

Group term life insurance offers several benefits for employees, including:

  • Affordability: Group premiums are typically lower than individual term life insurance policies, making it a cost-effective option for employees in cases where they have to bear the premium.
  • Convenience: Enrollment is often automatic or streamlined, and premiums are typically deducted from the employee’s paycheck.
  • No medical underwriting: Most group term life insurance policies do not require individual medical underwriting, ensuring coverage for employees regardless of their health status.
  • Supplemental coverage: Group term life insurance can provide additional coverage on top of an employee’s existing individual life insurance policy.
  • Peace of mind: Knowing that their loved ones will be financially protected in the event of an untimely demise can provide employees with peace of mind which has a direct impact on productivity.

In addition to these benefits, group term life insurance policies offer tax benefits to both employers and employees, as per prevailing tax laws. Employees can avail of tax benefits if the premium is borne by them.

Death benefits are exempt from tax under Section 10(10D) of the Income Tax Act, of 1961. Group insurance policies are also customizable to suit employee needs and provide no medical check-ups, making it a hassle-free option for employees.

Furthermore, group term life insurance policies can be renewable, ensuring continuity of coverage for employees. They also provide a default insurance cover, assist employers with gratuity funding, and offer accidental death and dismemberment coverage as riders.

Also, Read: What is Group Health Insurance Policy?

Group Term Life Insurance Benefits for Employers

Offering group term life insurance can also benefit employers in several ways:

  • Attractive employee benefits package: A comprehensive benefits package, including group term life insurance, can help employers attract and retain top talent.
  • Cost-effective: These policies are typically more cost-effective for employers than providing individual life insurance policies for each employee or for those employees who are buying the policy in their personal capacity.
  • Tax advantages: In many cases, the employer’s portion of the premiums for group term life insurance is tax-deductible as a business expense.
  • Improved employee morale and productivity: Offering group term life insurance can contribute to improved employee morale, loyalty, and productivity by demonstrating the employer’s commitment to their well-being.
  • Simplified administration: These policies are typically easier to administer than individual life insurance policies, reducing the administrative burden on employers.

Related Read: Benefits of Group Health Insurance

What Does a Group Term Life Insurance Cover?

Group term life insurance policies typically cover the following:

group term life insurance inclusions

1. Death benefit

The primary purpose of group term life insurance is to provide a lump sum death benefit to the designated beneficiaries in the event of an employee’s death during the coverage period.

2. Accidental death and dismemberment (AD&D) coverage

Many group term life insurance plans include additional coverage for accidental death or dismemberment, providing financial support in case of severe injuries or loss of limbs

3. Accelerated death benefits

Some policies offer accelerated death benefits, which allow employees to access a portion of the death benefit in advance if they are diagnosed with a terminal illness.

4. Waiver of premium provision

This feature allows employees to continue their coverage without paying premiums if they become disabled and unable to work, subject to specific conditions mentioned in the policy terms and conditions.

Also, Read: Health Insurance with OPD Cover

What Is Not Covered in Group Term Life Insurance?

While group term life insurance provides valuable coverage, there are certain exclusions and limitations that policyholders should be aware of:
group term life insurance exclusions

1. Pre-existing conditions

A few group term plans may exclude coverage for pre-existing medical conditions, at least for a specific period, and claims arising due to these conditions may not be honoured.

2. Self-harm or death by suicide

A few group term plans may exclude coverage for pre-existing medical conditions, at least for a specific period, and claims arising due to these conditions may not be honoured.

3. High-risk occupations or activities

Coverage may be limited or excluded for employees engaged in high-risk occupations or activities, such as military service, aviation, or extreme sports.

4. Age limits

Group term life insurance policies often have age limits, and coverage may be reduced or terminated once a member of the group reaches a certain age.

5. Coverage limits

There may be maximum coverage limits based on an employee’s salary or position within the company for the group term plan offered by the employer.

Additionally, group term life insurance policies may not provide coverage for critical illness or other specific conditions, unless explicitly stated in the plan details. It is crucial to carefully review the policy documents to understand what is covered and what is not covered under the group insurance policy provided to the employees by the employer.

Non-employer employee groups, such as associations and non-banking financial institutions, should also thoroughly evaluate the coverage details when obtaining group term life insurance for their members.

Quick Read: 10 Most Common Exclusions in Health Insurance

What to Consider While Choosing the Group Term Life Insurance Plans?

When choosing a group term life insurance plan, employers and non-employer employee groups, such as associations and non-banking financial institutions, should consider the following factors:

group term life insurance considerations
  • Coverage amount: Evaluate the coverage amount offered and determine if it aligns with the group’s financial needs and responsibilities in the event of death.
  • Premium costs: Assess the premium costs paid by the employer and determine if they fit within the budget for group term life insurance.
  • Portability: Consider whether the policy allows portability, enabling members of the group to convert their coverage to an individual policy if they leave the group.
  • Additional benefits: Evaluate the additional benefits offered, such as AD&D coverage, waiver of premium provisions, and accelerated death benefits for group term insurance.
  • Exclusions and limitations: Carefully review the policy’s exclusions and limitations to ensure a comprehensive understanding of what is covered and what is not covered under the group term life insurance plan.
  • Employer contribution: Determine the employer’s contribution toward the premiums, as this can significantly impact the overall cost of coverage for group term life insurance for employees.
  • Provider reputation and financial stability: Research the insurance provider’s reputation, financial strength, and claims-handling process to ensure a reliable and trustworthy partnership for providing life insurance coverage.

Such a plan offers coverage to all eligible members, typically at more affordable rates than individual life insurance policies, with potential tax benefits for the employer.

When choosing a group term life insurance policy, it is crucial to evaluate the coverage amount, premium costs, additional benefits, exclusions, and the insurance provider’s reputation to ensure a comprehensive and suitable plan for the group’s needs.

Also, Read: Difference Between Life Insurance and Health Insurance

Why Choose Onsurity for Your Group Term Life Insurance Policy?

Onsurity is a leading provider of group term life insurance solutions, offering comprehensive and customisable plans tailored to meet the unique needs of businesses and their employees. Here are a few reasons why you should consider Onsurity for your group term life insurance policy:

  • Competitive pricing: Onsurity offers competitive pricing structures, ensuring that employers receive the best value for their money.
  • Flexible coverage options: With a wide range of coverage options available, Onsurity allows employers to tailor their group term life plan to meet the specific needs of their workforce.
  • Exceptional customer service: Onsurity is renowned for its excellent customer service, providing personalised support and guidance throughout the process, from policy selection to claims handling.
  • Robust financial strength: Onsurity maintains a strong financial position, ensuring its ability to meet its obligations and provide reliable support to all members enrolled with their holistic healthcare and insurance plans.
  • Streamlined enrollment and administration: Onsurity’s user-friendly dashboard simplifies the enrollment and administration process, making it easy for employers and employees to manage their group term life insurance policies.
  • Comprehensive coverage: In addition to the standard death benefit, Onsurity offers a range of additional benefits, such as AD&D coverage and accelerated death benefits, providing a well-rounded protection plan for group term insurance. However, the benefits could vary based on the plan chosen.
  • Nationwide availability: Onsurity’s group term life insurance solutions are available nationwide, ensuring accessibility for businesses and employees across the country.

Also, Read: Health Insurance Claim Process

Conclusion

Group term life insurance is a valuable employee benefit that provides financial protection for employees and their loved ones in the event of an untimely demise. By understanding the features, benefits, and considerations of group term life insurance, employers and employees can make informed decisions and choose a plan that aligns with their needs and objectives.

Remember, life insurance is not just about protecting your employees’ loved ones financially; it’s about providing peace of mind which goes a long way when it comes to employee satisfaction and productivity at work.

FAQs:

1. What is group term life in salary?

Group term life insurance is a type of life insurance policy provided by employers to their employees as part of their employee benefits package. The coverage amount is often tied into the employee’s salary or a predetermined fixed amount.

2. What is the difference between term insurance and group term insurance?

Term insurance is an individual or retail life insurance policy that provides coverage for a specific period, usually ranging from 10 to 30 years, up to the age of 60 or 80. Group term insurance, on the other hand, is a life insurance policy offered by employers to their employees as a group, with coverage typically tied to employment.

3. What is the difference between group term life insurance and individual insurance?

Group term life insurance is offered by employers to their employees as a group policy, with lower premiums and no individual underwriting required. Individual life insurance is a policy purchased by an individual directly from an insurance provider, with premiums based on individual risk factors and underwriting.

4. Who is the beneficiary of a group life insurance?

The designated beneficiary of a group life insurance policy is typically chosen by the employee. This can be a spouse, children, or any other individual or entity specified by the employee.

5. What is the difference between group life insurance and term life insurance?

Group life insurance is a type of term life insurance policy offered by employers to their employees as a group. Term life insurance is an individual or retail policy that provides coverage for a specific period, typically ranging from 10 to 30 years. Group life insurance is often more affordable and does not require individual underwriting.

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