Group Term Life Insurance: Meaning and Benefits

Group Term Life Insurance: Meaning and Benefits 

Group term life insurance offers life insurance to a group of people under a single plan. Generally, many employers offer it to their employees.

In this article, we will explain what group term life insurance is and its benefits.

Group term life insurance is a type of life insurance policy that is offered to employees by employers. It provides the death benefit to the employee’s family in case he/she passes away during the term. Hence, group term life insurance can ensure the financial independence of the employees’ family.

What is Group Insurance?

A group term life insurance plan is offered to a group of people in order to provide them with life insurance. In case of this policy, there is no maturity benefit.

There are different types of group term life insurance policies. Some of them are-

  • Some plans provide add-ons like accidental benefit, critical illness benefit, etc.
  • There are some policies that offer cover based on the grade of the employee.

Who is Eligible for Group Term Life Insurance?

  • Employer-employee groups
  • Banks
  • Non-banking financial institutions
  • Non employer-employee groups
  • Microfinance institutions

How Does a Group Term Life Insurance Work?

  • A master policy is issued to a group administrator. The administrator must pay an initial premium.
  • The premium is charged based on factors like the age allocation of the group, changes in the size of the group, etc.
  • The members of the group are allowed to choose the sum assured.
  • Once the premium is paid, the members of the group are covered for a year.

Benefits of Group Term Insurance for Employees

  • Life Cover

A group term insurance allows the members to get life cover. In case the policyholder passes away during the tenure of the plan, his/her nominees can receive the death benefit. Hence, it can ensure the employee’s family doesn’t face any financial burden. Also, it is a great way to get insurance for people who haven’t purchased a life insurance policy.

  • Tax Benefits

The death benefit is exempt from tax under Section 10(10D).

  • Add-Ons

Add-ons are useful for enhancing the financial security of life insurance. A group term life insurance can be extended with add-ons such as accidental death benefit, education allowance, etc.

  • Cost-Effective

As group term life insurance is offered to a group of people, the premium of the plan tends to be lower compared to individual life insurance plans.

Benefit of Group Term Life Insurance for Employers

  • Gratuity Funding

Group term life insurance policies enable employers to fund their gratuity liability. Gratuity funds are built to fulfil gratuity payments.

Things to Keep in Mind About Group Term Life Insurance

  • Members can be added to the term policy at any time of the year.
  • The application process is easy.
  • The sum assured amount is pre-decided.

Why Group Term Life Insurance is Essential

A group term life insurance is beneficial to employees as well as employers. This plan can provide financial security to the family of the group members. Hence, it is a very simple way to get life insurance.

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