A group life insurance is a life insurance plan which covers a group of individuals for a specific period in return for a premium outflow. If the person covered dies during the coverage period, the insurer is liable to compensate as a lump sum or periodic payments to the beneficiaries chosen by such individual.
In most cases, organisations purchase term life insurance plans to provide life coverage to their employees, which often helps in improved retention rates. The premium is either partially or entirely paid by the employer. They also allow those covered to purchase additional coverage and extend it to their closest family members.
How does it work?
- The working of a group term life insurance is simple. The head, usually the employer or the head of the family, pays the premium amount and completes the necessary documentation for policy activation.
- These policies are valid for a year and need renewal in most cases. The entire process of buying or renewing these plans can be done online.
- The members are offered the choice of selecting the sum assured, whereby they can pay extra to get higher coverage. Once the documentation is complete and the payment is made, the group is covered for a year.
- The premium amount depends on the size of the group and its age distribution.
Features of group term life policy
Here are the key features of a term life insurance:
- Death benefit: The nominee gets a pre-defined sum in case of the death of the policyholder
- Tax benefits: Policyholders get tax benefits on the premium amount paid by them
- Can add multiple people: Most group term life insurance plans allow adding up to 100 members under its coverage
- Gratuity benefit: Some policies also offer gratuity benefits as an additional perk to the policyholders
- Premium bifurcation: Depending on the type of policy availed, i.e., contributory or non-contributory, the employee may have to pay a portion of the total premium, or the employer will entirely be responsible for the premium payment.
- Premium: The premium amount depends on the agreement signed by both parties before the commencement of the policy. It is directly proportional to the number of group members covered under the plan in most cases.
Benefits of group life insurance
Group life insurance plans are quite popular, especially in the professional world. Here are the benefits it entails:
- Provides financial cover in most circumstances: The group term insurance plans offer coverage to those part of the group. It doesn’t matter if an individual has a personal policy for the same purpose. The coverage remains valid.
- Offers financial assistance during an emergency: The primary reason for getting term insurance is to provide financial aid to the nominees after the policyholder’s untimely demise. Group term life insurance provides excellent coverage in such situations.
- Lower premium cost: Group policies are administered on a group basis, ensuring that the average premium per individual remains cheaper
- No medical check-up required: Unlike individual plans, group plans do not entail those covered to undergo a series of medical tests to be eligible for being a part of the group.
- Customisable: While it is imperative to understand that group plans may not cater to all your individual needs, these are customisable to ensure optimum coverage.
- Tax exemption: The person paying the policy amount is eligible for a tax deduction under Section 10 (10D) of Chapter VIA or 37(1) of the Income Tax Act, 1961
Here are the inclusions a group term policy supports:
- It allows eligible candidates to be added to the policy at any time of the year
- In case of the unfortunate death of the employee, the sum assured is payable to their nominees.
- Some policies allow policyholders to contribute additional enhancements, with the requested premium payable by the specific party.
Here is what is not covered under these policies:
- They become ineffective during times of war, invasion, riot, etc.
- These would not cover drug abuse/alcohol/solvent abuse unless those were prescribed and consumed under the directions of a registered medical practitioner and prescription.
- These become ineffective in attempting a criminal act.
- If you had any pre-existing medical condition, but you failed to disclose it during the time of policy creation, the insurer is not liable to cover you.
- Claims become redundant if the policyholder attempts suicide or inflicts injury on themselves.
Best Group term life insurance offerings in India
Plum Insurance’s Group Term Life Insurance
- Plum Insurance’s Group Life Insurance is a versatile package that offers complete coverage to all the people covered under the plan.
- It ensures guaranteed benefit on the demise of any group members and can accommodate up to 100 people under the same policy.
- In addition, it has ample room for customisation, allowing you to add optional riders to make the plan meaningful.
Bajaj Allianz Group Term Life Insurance
- Bajaj Allianz Group Term Life Insurance is a plan that offers up to INR 1 crore coverage to its members on the occasion of their death.
- In addition, it also has the option to increase plan value for each member and provide add-ons for critical illnesses.
- Moreover, the policyholder gets several customisation options to tweak the policy in the group’s best interest.
Max Life Group Term Life Insurance
- The Max Life Group Term Life Insurance is a clutter-free policy that does its primary job of providing life cover to groups.
- The plan offers adequate support to the members against any unwanted occurrences, such as accidents, illness, or death. It is one of the highest-rated offerings in this segment in the country.