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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:
1Death 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).
2 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.
3 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.
4 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.
Group Term Life Insurance Benefits to Employees
Employees can join the group term life insurance plan without the need for medical check-ups, making the process quick and simple.
Easy Enrollment Without Medical ExamsBoth 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.
Tax-Free Death BenefitsThe 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.
Flexible Coverage OptionsThe insurance automatically covers all members of the group, offering basic life insurance protection, regardless of whether they have individual coverage or not.
Automatic Basic Coverage
Benefits of Employers
Employers benefit from group term life insurance plans in several ways:
- 01
Tax Savings on Premiums
Employers can earn tax benefits on the premiums they pay for group term life insurance.
- 02
Affordable Coverage
Group-term life insurance plans are more cost-effective than individual plans because covering a group is less expensive for employers.
- 03
Employee Retention
In large companies, these plans help retain employees, as they feel valued and appreciated with added benefits.
- 04
Disability and Life Benefits
Some plans offer both life and disability coverage, providing employees with additional support.
- 05
Better Returns on Funds
If the funds perform well, employers can reduce their costs by gaining higher returns on the investment.
Types of Group Term Life Insurance
Employer-Sponsored
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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.
Non-Employer Sponsored
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.
Factors That Impact Group Term Life Insurance Premium
Group term life insurance is influenced by several factors, including:
- 1
Coverage Amount
The more insurance coverage each person gets, the higher the premium.
- 2
Location:
Insurance prices can vary based on where the group is located, depending on local death rates, medical costs, and laws.
- 3
Age and Gender:
Younger people and women often pay lower premiums because they have a lower risk of death.
- 4
Occupational Risk:
The type of work people do can affect premiums. Jobs with higher risks may have higher premiums.
- 5
Duration of Coverage:
The longer the insurance is needed, the higher the premium, as the insurer faces more risk over time.
- 6
Group Size:
Larger groups usually get cheaper premiums because they can spread the cost among more members.
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.
How to Get Group Term Life Insurance
If you need to make a claim on a life insurance policy, here are three simple ways to do it:
- 1
Review 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.
- 2
Understand 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.
- 3
Consider 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.
- 4
Talk 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.
- 5
Compare 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.
- 6
Update 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.
FAQs
A group term insurance plan is a type of life insurance that covers a group of people, usually employees in a company or members of an organization. It provides basic life coverage for the group, often at a lower cost than individual plans.
Yes, group term insurance is a good option for many people because it's affordable and easy to get through your employer or group. However, it may not provide as much coverage as individual plans, so it's important to check if it meets your needs.
Term life insurance is a type of insurance that provides coverage for a set period, usually for an individual. Group term life insurance is similar but covers a group of people, like employees, and is usually offered by an employer or organization.
The employer or organization that offers the group term life insurance is the policyholder or owner of the policy. The individual members of the group are the insured persons, but they don't own the policy.
Term life insurance is cheaper and provides coverage for a specific time, while whole life insurance covers you for your entire life and builds cash value over time. Term life is better for those looking for affordable coverage, while whole life is suited for those seeking lifelong coverage and savings.
There are different types of group insurance, such as group health insurance, group term life insurance, and group disability insurance. These plans are offered to groups, like employees or members of organizations, to provide various kinds of coverage.
A group term life policy is a life insurance plan that covers a group of people. It provides basic life insurance coverage to all members of the group, typically at an affordable rate, and is usually provided by employers or organizations.