Group Term Life Insurance Eligibiltiy & Benefits

If you are a salaried employee, you can avail of a group term life insurance offered by your organisation. Read on to know more about it.As the name suggests, group term life insurance refers to an insurance policy offered by an organisation to cover a group of people that is all their employees under a single plan. It provides financial security to the employee's family after their demise. Apart from offering financial protection to the employee's family, a group term life insurance policy also serves as an employee retention tool in many large organisations.

Insurance companies in India offer group term life insurance policy to the following sections:

• Banks
• Professional groups
• Employer-employee groups
• Microfinance organisations
• NBFCs (Non-banking Financial Companies)

There are different types of group term life insurance policies. The policy under which you get covered depends on the terms and conditions agreed between your employer and the insurance company.There are group term life insurance plans that offer uniform cover to all the members.Some plans offer special benefits to certain members based on their grades or designation in the organisation.A few schemes provide coverage against outstanding loans, like a car loan, home loan , etc.Some plans allow the members to buy riders like disability benefits, accident benefits, and critical illness cover.

The group term life insurance works similar to the individual life insurance policy. The flowchart of group insurance is as follows:

• The organisation/employer/group administrator purchases a policy from an insurance company of their choice and pays the initial premium.
• The initial payment covers all the members of the organisation for one year.
• Insurance companies give policy buyers the flexibility to choose the sum assured of the master policy and individual members covered under the plan.
• The group term life insurance policy must be renewed annually.
• The policy's premium depends on the size of the group and the age of the members covered under the policy.

• Employers can add a new member at any point of the year.
• The application process is easy and quick. As an employee, you must submit an application form and comply with the KYC documents.
• The organisation must have at least 50 members to purchase group insurance.

A group life insurance policy benefits the members covered in more than one ways:

• The employees' families are assured of getting financial assistance in the event of their untimely and unfortunate demise.
• Depending on the policy's terms and conditions, the employees can undergo annual health check-ups for free.
• The death benefits received are exempted under Section 10(10D) of the Indian Income Tax Act in the employees' family member's hands.
• The group life insurance policy has a simple documentation process.
• It offers financial security to the employee's family.
• The premium for a group insurance policy is cheaper than an individual policy. The payment of the premium is easy too. There is minimal risk of missing the premium payment as it is automatically deducted from your salary.
• If the group policy offers gratuity benefits, the employees receive gratuity benefits from the employer upon completing a specific number of years of service with the organisation. Generally, the gratuity is paid after completion of five years of services.
• Every employee, irrespective of the pay grade, gets life protection; they are automatically covered under the group policy by virtue of being an employee.

While a group insurance cover provides your family the much-needed financial protection against the uncertainties of life, you must know that the coverage is often limited. You are also eligible to enjoy the benefits of group insurance only till you are employed with the organisation. If you switch jobs or quit the organisation, the group insurance cover ceases to exist.So, even if you are covered under the group term life insurance, it is advisable to purchase an individual policy so that you are not devoid of an insurance cover at any point in life. Also, by buying an individual policy, you can get higher coverage and customise the policy to suit your family's specific needs.

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.