Group Life Insurance

A group term life insurance plan refers to a life insurance plan that covers a group of people for a specified term or period in exchange for a fixed rate of premium payment. It provides life coverage to a group of people and pays compensation to the group member’s family if he/she dies during the policy term. The compensation amount is either paid to the family as a lump sum death payout or a monthly payout.

Group term insurance plans are mostly purchased by companies/businesses to provide life insurance coverage to their employees. When an employer purchases a group term life insurance policy for its workers as an incentive, the employer becomes the policyholder and the employee becomes the beneficiary. In the event of an employee’s death, the plan provides financial independence to the employee’s family by offering them a death payout.

Many employers provide a basic level of group term coverage at no additional expense to their employees. After all, a group term insurance plan is more affordable than buying individual term insurance for each employee. Moreover, they also give their employees the option to buy additional coverage as per their requirements and extend the coverage to the employees’ spouses and children.

However, a community insurance scheme is not limited to only employer-employee groups but also includes bank clients, NGOs, professional organizations, non-banking financial institutions, and microfinance institutions.

Group Term Life Insurance Plans are designed to provide life insurance to a group of individuals under a single scheme. In the case of an employee’s death, a group term insurance policy provides financial support and freedom to the employee’s beneficiaries. It provides various advantages, ranging from universal coverage for all to ranked coverage for different levels of members. Some community insurance plans also cover unpaid debts for a group of creditors, and others offer critical illness and injury coverage. Take a look at the various benefits of group term life insurance plans below:

Default Insurance Cover

The group term policy covers members of a community or group simply by being a part of the group. It provides basic coverage to all group members irrespective of whether they have a personal life insurance policy or not.

Gratuity Funding

Employers benefit from the structured approach of accumulating funds for their potential gratuity liability to their workers. A group term insurance scheme makes this easier for employers and offers life insurance coverage to the workers.

Tax Benefits

Employers and contractors both profit from group term life insurance policies. Death benefits are tax-free according to Section 10(10D) of the Income Tax Act of 1961.

Customizable to Suit the Employee’s Needs

Add-on covers, such as tuition premiums, repatriation allowance, accidental death, and more, can be added to the group term insurance policies to offer a wide range of benefits to the employees in addition to the base cover.

No Medical Check-ups

Employees are relieved of the burden of undergoing medical examinations before getting enrolled under group term insurance plans.

Budget-friendly

A group plan’s premium is much lower than that of individual plans because it covers many individuals.

Employee-employer classes, banks, non-banking financial companies, non-employer – employee groups, specialist groups, and microfinance institutions can buy community term life insurance plans for their working-class/ employees/ group members. The group term insurance eligibility criteria differ for each of these groups. Moreover, the size of the group may also vary from one insurance policy to another. Moreover, the minimum age to enter the plan is usually 18 years old and the maximum age limit ranges from 65 to 69 years.

Although some group term life plans provide uniform and basic coverage to all plan members, others provide supplemental and graded coverage depending on the skilled ranking or role of the plan members.