what a group life insurance policy

What is a Group Life Insurance Policy?

Understand what a group life insurance policy is, its benefits, and how it offers coverage to multiple members under a single plan.

Written by : Knowledge Centre Team

2025-12-24

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7 minutes read

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In today’s day and age, group life insurance plans have become a central constituent of the benefit packages offered by employers to their employees. Essentially, a group life insurance policy refers to the life insurance coverage provided to a group of people, usually employees working in an organization. The primary purpose of the group life insurance policies is to provide financial independence and support to the concerned employee’s family in case of any emergencies. In case of the concerned employee’s demise while employed with the organization, the respective group insurance policy would provide the much-needed monetary guarantee to the grieving family.

The primary purpose of the group life insurance policies is to provide financial independence and support to the concerned employee’s family in case of any emergencies. In case of the concerned employee’s demise while employed with the organisation, the respective group insurance policy would provide the much-needed monetary guarantee to the grieving family.

Key Takeaways

  • A group life insurance policy offers life cover to multiple individuals under a single master contract.

  • Individual members are not required to submit separate applications or undergo medical tests.

  • These policies are cost-effective and ideal for organisations seeking to extend life insurance benefits to all members.

  • Coverage continues as long as the individual remains part of the group.

  • Some plans offer the option to convert to individual policies if a member exits the group.

  • Group insurance plans help build employee loyalty, financial security, and a more inclusive benefits framework.

Eligibility Criteria for Group Life Insurance Policies

Group life insurance is designed to provide coverage to a collection of individuals who share a common bond. This bond can be based on employment, membership, or even financial transactions. The following types of groups are typically eligible to purchase group life insurance policies:

  1. Banks: Banks can offer group life insurance policies to their account holders, borrowers, or staff. For example, a bank may provide coverage to all savings account holders or extend a policy as part of a home loan agreement.

  2. Non-banking financial institutions: Similar to banks, NBFIs, such as housing finance companies, leasing firms, or micro-lending institutions, can provide group life cover to their customers or employees. These plans often protect borrowers against loan liabilities in the event of untimely death.

  3. Employer-employee groups: This is the most common type of group for life insurance policies. Organisations of all sizes, from startups to large corporations, can buy group term life insurance for their employees. Coverage is usually linked to the employee's tenure with the organisation and may be offered as part of the overall compensation package.

  4. Non-employer-employee groups: These include groups that may not have a formal employer-employee relationship but still share a recognised association. Examples include members of a cooperative society, alumni associations, credit card holders, or even customers of an e-commerce platform. The key is that the group must have a valid reason to exist other than the purpose of availing insurance.

  5. Microfinance institutions: MFIs often serve low-income communities by providing small loans. They can also offer group life insurance to borrowers as an added security. This ensures loan protection in the event of a borrower’s death, thereby reducing risk for both the institution and the borrower's family.

  6. Professional groups: Groups formed based on profession, interest, or association, such as trade unions, teachers' associations, doctors' federations, or cultural groups, can also be eligible. These affinity groups must have a documented structure and recognised membership to qualify.

Also Read - Group Term Life Insurance

Features of the Group Life Insurance Policies

A group life insurance policy essentially provides affordable and efficient life insurance protection to the employees working within an organisation. Some of the important features of these group life insurance policies include:–

  1. Insurance Coverage for Large Group of People: A group life insurance policy provides life cover protection to multiple individuals under single or master contract policy. The insurance company does not have to go through the tedious process of filling out applications or conducting medical tests for each applicant. Instead, the employer becomes the applicant and also the master policyholder, thus choosing the policy benefits and completing the formalities of buying the group life insurance policy.

  2. Affordable Life Cover: Affordability is one of the significant features of group life insurance policies. Both the employers and the employees usually share the cost of availing the life insurance benefit, making it highly affordable for all concerned individuals. As part of the premium contribution, the employer may decide to deduct a small part of the employee's salary.

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Working of a Group Life Insurance Policy

Group life insurance is designed to be straightforward, scalable, and efficient, particularly for organisations managing large groups of individuals. Here's a closer look at how it typically operates:

  1. Issuance of the Master Policy: The insurer issues a master policy to the group administrator or employer, who acts as the policyholder on behalf of all the members. This follows the initial premium payment, which activates the policy.
    • The group administrator could be an HR manager, a bank representative, or an authorised member of a professional or community organisation.
    • The master policy outlines all key terms, including sum assured options, premium structure, policy tenure, and renewal conditions.
  2. Coverage Duration: The policy generally provides one year of cover from the start date. This duration is standard for most group life insurance plans.
    • All eligible and enrolled members remain covered during this period.
    • The cover remains valid as long as the individual remains part of the group.
  3. Choice of Sum Assured: Depending on the policy agreement, group members may be offered the flexibility to choose their sum assured, which could be:
    • A fixed lump sum amount (e.g. £5 lakh equivalent in rupees for each member),
    • Or an amount linked to their monthly salary, loan value, or even their professional role.
    • This approach helps align the level of cover with each individual’s financial responsibilities.
  4. Annual Renewability: Group life policies are typically renewable on an annual basis. At the end of the coverage period, the employer or group administrator is required to:
    • Reconfirm and update the member list
    • Add new joiners and remove those who have exited
    • And pay the renewal premium to ensure continuity of cover
    • This annual renewal also enables the group to reevaluate the policy terms and adjust them accordingly based on changing needs.
  5. Premium Calculation: The total premium payable is calculated based on several factors, such as:
    • The total number of members in the group,
    • The age profile of the group (younger groups usually attract lower premiums),
    • The type of cover selected (e.g., basic life cover vs. policies with added riders like accidental death benefit),
    • And the nature of the group’s activities (desk-based professionals vs. high-risk roles).

The pooling of risk across many members helps keep the cost per person significantly lower than individual life insurance policies.

Canara HSBC Life Insurance offers a variety of group life insurance plans that can help employers and affinity groups to maximize their employee benefit payouts effectively. At the same time, these plans help secure the life insurance and financial needs of their members.

Features of Group Insurance

Here are some of the key features of group insurance:

  • As risk spreads over a large number of people, a group insurance plan provides standardised coverage at competitive premium rates. This means that the coverage is the same for all members of a group.
  • Irrespective of the size of the group, group insurance covers all members under the same plan. The plan may be in the form of group life insurance, group health insurance, group travel insurance or group personal accident insurance.
  • A group can comprise an employer and employees or non-employer and employees such as holders of a credit card or members of a social or cultural association.
  • The manager of the group gets a master policy in the name of the group.
  • Premium is charged to the members or can be paid by the group.
  • A member is covered as long as he is a part of the group. The cover ceases if a member leaves the group.

Group insurance plans by Canara HSBC Life Insurance are a smart choice for employers and associations operating in different sectors. These plans secure the financial needs of group members and help employers meet their employee benefit payouts in an effective manner.

Benefits of Group Insurance

Buying a group insurance plan can be rewarding for individual group members such as employees as well as employers. Today, many companies and businesses prefer to cover their employees with group insurance as part of the overall compensation.

Here are the key advantages of a group insurance plan for employers and employees:

  • The premium paid in group insurance is lower than the premium in an individual policy for a member. These plans reduce the liability of the insurance provider as the risk is spread across all members of the group.
  • As premiums are often paid by the employer, group insurance offers a convenient way to cover all employees with different income brackets. These plans provide a cost-effective means for employers to provide an insurance cover for their employees.
  • Group insurance helps enhance the loyalty of employees to the employer. A group member feels valued to be a part of the group and is likely to continue their association with the group for a long period. In addition, these plans help employers create an employee-friendly workplace and a positive work environment.
  • Often, a group insurance plan covers family members of group members. For example, many group health insurance plans cover spouses, dependent children and parents of the group member.
  • Group members can claim tax benefits on the premium paid on group insurance while filing their income tax returns. Employers can also claim tax benefits for paying premiums on insurance plans for their employees.
  • Group insurance provides standardised coverage for all members. It helps people from lower-income groups to get the same coverage as those from higher-income groups.
  • Some group insurance plans can be converted into individual plans when a member leaves a group. In such a case, the member has to pay a conversion fee.
  • Group members are not required to fulfil pre-requisite conditions. On the other hand, individual insurance plans often require the policy applicant to undergo a health check-up.

Eligibility criteria:

Here are the eligibility requirements for a group insurance plan:

  • Minimum Group Size: Group insurance policies require a minimum number of members to be eligible. This number typically ranges from 10 to 50 individuals, depending on the type of group and the insurer’s terms. Larger groups may benefit from lower premium rates due to the wider risk distribution.
  • Minimum Entry Age: The minimum age for entry is typically 18 years, ensuring that all participants are legally eligible to enter into an insurance contract.
  • Maximum Entry Age: The maximum age limit varies depending on the insurer and plan type. Some policies set the limit at 60 years, while others may allow members to join up to 75 or even 80 years of age. Group administrators should verify age restrictions in advance, especially if the group includes older members.
  • Active Membership Requirement: All individuals covered under the policy must be active, full-time members of the group at the time of enrolment. This means that part-time members, retirees or temporary participants may not always qualify unless specifically included in the policy terms.

Conclusion

Group insurance offers a smart and convenient option to cover all members of a group under the same plan. Such a plan offers several benefits to individual members as well as the group as a whole.

The Group Advantage Term Plan by Canara HSBC Life Insurance is a non-linked one-year term plan for non-employer employee groups. This plan provides life cover to group members and secures their families against the uncertainties of life. In this plan, you can opt for a fixed sum assured or a linearly reducing one. It also provides flexibility to modify the benefits and coverage.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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