Group Term Life Insurance

Group Term Life Insurance is a type of life insurance coverage that provides the benefit of life insurance cover to a group under a single policy. If the death of the person covered in the group occurs during the policy term, the death benefit is provided to the nominee.

A group term life insurance plan is taken by the employer with the objective of providing benefits to its employees. Group term life insurance is offered by many large companies free of cost to their employees. Through this, employees can avail a term insurance plan at the lowest cost. Also, employers can customize a group life insurance plan according to their needs and add riders to avail additional coverage.

The age to join a group term life insurance plan should be between 18 years to 60 years. In case of death of an employee during the policy term, the death benefit as a lump sum is provided to his family or nominee.

Individually bought term life insurance plans make you pay higher premiums as compared to group term life insurance plans. Hence a group term life insurance plan is comparatively cheaper. Some companies pay the entire premium themselves. But there are some companies that pay a part of the premium for life insurance and the rest has to be paid by the employees.

How does Group Term Life Insurance Work?

In group term life insurance, the policyholder is the employer. Group term life insurance is an agreement between the insurance company and the employer. Any number of persons can be added to a group term life insurance.

The Sum Assured is chosen by the employer as per the requirement of the group and the premium is paid accordingly. In a group term life insurance plan, the employer can add a new member at any time and can also remove him/her if required.

After being enrolled in a group term life insurance plan, death benefit is provided to the nominee by the employee in case of accidental death of the employee.

What Are The Benefits Of Group Term Life Insurance?

Now we will know in detail about the benefits of Group Term Life Insurance Plan. A group term insurance plan not only benefits the employees but also the employer.

We will discuss in detail below the benefits that both employees and employers can get from group term life insurance plans.

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A. Benefits of Group Term Life Insurance for Employees

Following are the benefits of Group Term Life Insurance for Employees :

1. Financial Coverage:

Financial coverage is provided to the family of the employees through a group term life insurance plan. In case of accidental death of the employee, the nominee is provided financial benefit in the form of death benefit by the employee. Through this, families can meet their financial needs even in the absence of the employee.

2. Free/Cheap Premium:

In a group term life insurance, the employee either does not have to pay any premium and if he has to, it is a very low premium. Thus by paying minimum premium an employee can avail the benefits of term life insurance plan.

3. Tax-Free Death Benefit:

The death benefit received through group term life insurance is tax free. In case of accidental death of the employee, the death benefit received from it is exempt from tax as per section 10(10D) of the Income Tax Act, 1961.

4. Riders:

In a group term life insurance plan, the employee can also add additional riders as per his requirement. This option is provided by the employer to your employees. If the employee wishes, he can enhance the coverage of his group term life insurance plan by adding multiple riders like accidental death benefit, critical illness cover.

5. No Medical Test:

In Group Term Life Insurance Plan, the employee does not have to undergo any kind of medical test. He is considered eligible to join a group term life insurance plan without a medical test. Whereas if you take an individual term life insurance plan then you are required to undergo a medical test.

B. Benefits of Group Term Life Insurance for Employers

Following are the benefits of Group Term Life Insurance for Employers-

1. Cheap Term Insurance:

Through a group term life insurance, the employer can provide the benefit of a term insurance plan to his employees at a very low cost. Because companies buy group term life insurance in bulk for their employees. Therefore, the cost of the premium involved is much lower than that of individual term life insurance.

2. Reducing Staff Shortage:

Through a group term life insurance, the employer can also overcome the shortage of employees in your company. Before going to any company, it is seen by the employees about the benefits they will get from that company. If a company offers group term life insurance plans to the employees without paying any premium, then the employees are more inclined to work in that company.

3. Tax Benefits:

The premium paid for a group term life insurance also provides tax benefits to the employer as per the Income Tax Act 1961. Thus by getting tax benefit on premium, the employer can save tax for his company.

4. Increases the performance of the employees:

The premium paid for a group term life insurance also provides tax benefits to the employer as per the Income Tax Act 1961. Thus by getting tax benefit on premium, the employer can save tax for his company.

5. Flexibility :

A group term life insurance plan provides flexibility to the employer. The employer can add any new employees to the plan whenever he wants and can also exclude any employees if necessary.

Disadvantages Of Group Term Life Insurance

The following are the disadvantages of Group Term Life Insurance :

1. A group term life insurance plan gives the employees a lot of control over their term life insurance plan. He cannot make any changes in his group term life insurance plan.
2. If the employee leaves the company, his group term life insurance coverage ceases. Thus, as long as the employee works in the company, he is provided with the coverage of term life insurance. His term life insurance coverage ends as soon as he leaves the company.