Group Term Life
Group Term Life insurance offers life coverage to a group of people for a specific period, usually through an employer or organization.
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What is a Group Term Life Insurance Plan?
Group Term Life Insurance (GTLI) is a type of life insurance that employees get through their employer or a group they belong to, like a professional association. It’s usually part of the benefits package, with the employer paying the premium. This insurance helps protect employees financially in case of death and can be a good option to consider alongside personal life insurance.
How Group Term Life Insurance Works?
In group-term life insurance, a group administrator pays an initial amount to get a master policy. This payment covers everyone in the group for one year. The coverage is decided based on the salary or as per the company’s policies. Once the payment is made, the group members are covered for a year starting from the policy's beginning date.
Group life insurance policies are renewed every year. The cost (premium) depends on the size of the group and the ages of the members.
Features of Group Term Life Insurance Policy
Group Term Life Insurance (GTLI) is a life insurance plan offered through your workplace. It provides affordable life coverage with several benefits. Here’s a simple breakdown of what GTLI offers:
- Death Payout: If an employee dies due to any cause (including sucide), the insurance will pay a guaranteed amount to the nominee (the person chosen by the employee).
- Employee Coverage by Default: When you join a company, you are automatically enrolled in the GTLI plan as part of your employee benefits (if provided by the company). Some companies also allow you to buy an extra individual life insurance plan that continues even after you leave the company.
- Premium Payment: The company usually pays for the insurance premium. However, in some cases, the employee might pay the premium, and the amount is deducted from their salary.
- Credit Protection: If someone with an unpaid loan dies, banks can lose money. A group credit protection plan helps banks protect themselves from such losses.
Types of Group Term Life Insurance
Now let's discuss different types of Group Term Life Insurance plans in India.
1Employer-Sponsored Group Term Life Insurance
- Basic Group Term Life Insurance: This is standard coverage given to employees by their employer. The employer pays the premiums, and the coverage is usually based on the employee's salary.
- Supplemental Group Term Life Insurance: This is extra coverage that employees can buy on top of the basic insurance. Employees pay for this additional coverage.
2Non-Employer Sponsored Group Term Life Insurance
- Association Group Term Life Insurance: This coverage is offered through an association or organization, and members can buy it at a lower price.
- Affinity Group Term Life Insurance: It is similar to Association Group Term Life Insurance, but offered to members of special groups, like a credit union or alumni association.
- Credit Life Insurance: Lenders offer this insurance to borrowers. If the borrower passes away before paying off the loan, the policy will cover the remaining debt.
- Wholesale Group Term Life Insurance: This insurance is sold to a large group, like a company or labor union, at a discounted price, and the group then gives coverage to its members.
Group Term Life Insurance Benefits to Employees
1Easy Enrollment Without Medical Exams
Employees can join the group term life insurance plan without the need for medical check-ups, making the process quick and simple.
2Tax-Free Death Benefits
Both employers and contractors enjoy the advantage of tax-free death benefits under this insurance, as stated in Section 10(10D) of the Income Tax Act of 1961.
3Flexible Coverage Options
The group term insurance can be customized with additional coverage options such as accidental death, repatriation allowance, and tuition premiums, providing a broader range of benefits to employees.
4Automatic Basic Coverage
The insurance automatically covers all members of the group, offering basic life insurance protection, regardless of whether they have individual coverage or not.
Benefits of Employers
Employers benefit from group term life insurance plans in several ways:
1Tax Savings on Premiums
Employers can earn tax benefits on the premiums they pay for group term life insurance.
2Affordable Coverage
Group-term life insurance plans are more cost-effective than individual plans because covering a group is less expensive for employers.
3Employee Retention
In large companies, these plans help retain employees, as they feel valued and appreciated with added benefits.
4Disability and Life Benefits
Some plans offer both life and disability coverage, providing employees with additional support.
5Better Returns on Funds
If the funds perform well, employers can reduce their costs by gaining higher returns on the investment.
Eligibility Criteria of Group Term Life Insurance Plan
Group term life insurance plans are available for employees in different sectors like banks, non-banking financial companies, microfinance institutions, and specialized groups. The eligibility for these plans can vary for each group, and the size of the group can differ between policies. Typically, the minimum age to join is 18 years old, and the maximum age limit is between 65 and 69 years.
Some group term life plans offer basic coverage for all members, while others provide extra coverage based on the employee’s role or skill level.
Factors That Impact Group Term Life Insurance Premium
Group term life insurance is influenced by several factors, including:
- Coverage Amount: The more insurance coverage each person gets, the higher the premium.
- Location: Insurance prices can vary based on where the group is located, depending on local death rates, medical costs, and laws.
- Age and Gender: Younger people and women often pay lower premiums because they have a lower risk of death.
- Occupational Risk: The type of work people do can affect premiums. Jobs with higher risks may have higher premiums.
- Duration of Coverage: The longer the insurance is needed, the higher the premium, as the insurer faces more risk over time.
- Group Size: Larger groups usually get cheaper premiums because they can spread the cost among more members.
How to Get Group Term Life Insurance
1Review Your Employer’s Offerings
Check if your employer provides group term life insurance as part of your benefits package. It’s often affordable and easy to get through your workplace.
2Understand the Terms of the Plan
Make sure you understand the terms and conditions of the insurance policy before enrolling. Be aware of any exclusions or limitations that might affect your benefits.
3Consider Extra Coverage
If the coverage from your employer’s plan isn’t enough, you can think about adding extra coverage through a separate policy or rider, especially if you have dependents or larger financial responsibilities.
4Talk to HR for Enrollment
If your employer offers group term life insurance, you’ll likely need to complete an enrollment form through your HR department, providing personal information and choosing your coverage amount.
5Compare Prices from Multiple Providers
Group term life insurance costs can differ depending on your coverage needs and location. It’s a good idea to compare quotes from different providers to find the best deal.
6Update Your Coverage When Needed
Life events like marriage or having children may change your insurance needs. It’s important to review your coverage regularly to ensure it matches your current situation.