What is Group Term Insurance? 4 Things You Should Know

In the bid to attract and retain top talent, modern organizations now look for innovative retention and loyalty-building tools. One of the most effective and helpful among these is group life insurance. It helps an organization offer a sort of financial stability to the dependents of their employees.But what is a group insurance policy? These 4 points will help you understand them better-

As the name suggests, a group life insurance policy offers life cover to a group of people. Hence, it can be purchased for employees of a company, members of an association, non-profit organizations, consumer groups, and many different types of self-interest groups.It is a single life insurance policy that covers multiple members. In case of an unfortunate event, the family members of the individual covered under one such policy will receive a lump sum death benefit.

The insurer gives the option to choose the sum assured. Once the policyholder pays the premium, every member will be provided with the benefits of group term insurance . The premium is based on the number of members and the age group which they belong to.

The Master Policyholder, also known as Policy Administrator, is the one who has purchased a group insurance policy. Therefore, in case the policy is purchased by an employer for their employees, the employer will be the Master Policyholder.It will be the responsibility of the Master Policyholder to pay premiums regularly for keeping the life cover valid. The premium can either be paid annually, half-yearly, quarterly, or even monthly.

With group term insurance , there are two coverage options available- graded or flat. If all the different employees covered under a group plan have different coverage amounts, it is known as a graded coverage.Financial liabilities or salary of the employee are taken into consideration in the case of graded coverage. Flat coverage is when all the employees have the same coverage amount.

The various features of group term insurance make it a good option for employees as well as employers. One of the most important features of group term insurance is that it provides a sum assured to the beneficiary of the policyholder, in case the insured person passes away untimely.Furthermore, employees can be added to the policy at any time. Employers can also purchase various add-ons. Also, the application process doesn’t require a lot of efforts.

Group insurance is an excellent way for employers to offer financial assistance to the family members of an employee in case of their unfortunate death.Also, the documentation process for employees is easy.While group term insurance provides benefits to the employees, it can also help the employers. Employers can also claim tax deductions on the premiums paid for such policies as per the prevailing tax laws. Not to forget the fact that benefits like group insurance increase the credibility of an employer and work as a powerful retention tool.

Group life insurance offers several valuable benefits for the Master Policyholder as well as to the members covered under the policy. If you are an employer or head of an association or non-profit organization, do consult a top insurer to know more about group insurance policies.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.