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GROUP TERM LIFE

WHAT IS GROUP TERM INSURANCE ?

A type of insurance coverage offered to a group of people. This coverage will provide a monetary benefit to the beneficiaries if the covered individual dies during the defined covered period.

As with other types of group benefits, group term life insurance is generally cheaper than individual policy coverage. For this reason, the group term life insurance is often a key component in employee benefit packages.

The premiums are based on the company’s deaths experience, proposed sum assured, range of employees’ ages and the occupation of the employees.

WHY IS GROUP TERM LIFE INSURANCE IMPORTANT ?

Most of us do not use insurance as a risk management tool. Insurance is still used to save taxes or make savings. Therefore, most of us buy investment-based plans, which have a meagre sum assured. In case of untimely death of a person these policies are unable to provide enough corpus, which can replace the income of the person.

A Group Term Life cover supplements the sum assured taken by an employee and provides financial relief to the family in case of the employee’s untimely death.

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Salient Features of the Policy

  • One master policy issued covering all members of the group
  • One-year renewable plan
  • Minimum 10 Employees to consider it as group
  • Sum assured is payable on death (either due to natural causes or accidents)
  • Addition and deletion of group members on pro-rata basis
  • No health tests required for group members up to a defined sum assured limit which is called ‘Free Cover Limit’. Health tests applicable to members who have sum assured above the Free Cover Limit

CAN THE MEMBER CARRY THE POLICY ON LEAVING THE GROUP ?

No, all benefits under the plan are terminated when a member leaves the group.

CAN THE SUM ASSURED BE CHANGED MIDTERM ?

No, sum assured cannot be changed midterm unless the sum assured for the whole group or the hierarchy is being revised. Sum assured can also be changed if any person has been promoted during the policy duration and the new designation enjoys a higher sum assured.

INFORMATION REQUIRED BY INSURERS TO QUOTE

Insurers require the following information for each member of the group:

  • Date of birth
  • Date of Joining
  • Designation
  • Proposed Sum Assured
  • Declaration of any deaths in the three previous years

OPEN ENROLLMENT PERIOD

This is typically when the new policy is taken or when the renewal is done. This has a cycle of one year. All the employees have the option of enrolling into the policy by adding or deleting, making changes in the dependents list, opting in or opting out of optional covers. Once the submission is done, the coverage freezes for one year and no mid-term changes are allowed.

QUALIFYING EVENT ENROLLMENT PERIOD

This is when a new employee is joins or when an existing employee want to add his newly wed spouse or new born baby. Employee cannot make any changes in the existing dependents list.

ADVANCE PREMIUM DEPOSIT WITH INSURER

As per section 64Vb clause by regulator, the insurer can provide the risk coverage only when he has received the premium. To meet this clause, the insurer maintains an advance premium deposit for group policies. If the advance premium is adequately maintained, the employee will be given coverage from day 1 of joining. If the premium is not adequate, the coverage will start from the date of receipt of premium at the insurers end. Hence, it is advisable to maintain sufficient advance premium deposit balance with the insurer. The enrolment tool should be capable of showing you the advance premium balance available at any point of time.

IS GROUP TERM LIFE INSURANCE TAXABLE ?

Group Term Life Insurance provides tax benefit to both the Employees and Employer. Also, Death benefits are exempt from Income Tax under section 10 (10D) of Income Tax act in India.

HOW TO CALCULATE GROUP TERM LIFE INSURANCE PREMIUM AND WHAT WILL BE PREMIUM RATES ?

Group Term Life Insurance policies premiums are calculated based on the No. of Employees, Nature of Work, Death cases history over the last 3 years.
The premiums will vary based on the Group size and kind of industry. Generally, Premiums will be very cost effective in comparison to retail policies for white collar Employment People. For blue collar Employees, the premiums will vary based on the Risk Exposure.

WHO CAN BE THE GROUP TERM LIFE INSURANCE BENEFICIARY ?

The Beneficiary or Nominee will be as declared by the Policy Holder. They can be Immediate family members, spouse / Children / Parents / a friend too. Incase if the non family member is declared as nominee, They have to prove the insurable interest too to the Insurer.
You can always change the nominee in the policy, in case of a death the latest declaration will be considered by the Insurer. Also you can declare multiple nominees by mentioning % of the benefit to each nominee.

WHICH ARE THE INSURANCE COMPANIES OFFERING GROUP TERM LIFE INSURANCE ?

The Group Term Life Insurance Policies are offered by almost all the companies. To name few - Maxlife, Metlife, ICICI Prudential, HDFC Standard Life, Pramera Life, Reliance Life, Birla Sunlife etc.,
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