Group term life insurance is a popular employee benefit for a lot of companies today. Insurance helps employers secure their employees’ families financially. Such benefits help the workforce to focus and relaxed about the safety of their family’s future.
It is a type of life insurance where one contract covers the whole group of people. Typically, a policy owner is an employer or business similar to a trade union and the policy includes employees or team members. Group term insurance is often provided as part of a comprehensive employee benefits package.
In most cases, the cost of group term insurance is much lower than what employees will pay for the same protection cover individually. So, this life insurance is a win-win deal for both the employer and employees. Also, if you do not have any other insurance, a group term life insurance will offer a basic safety umbrella.
What is Group Term Life Insurance?
Group term life insurance is a life insurance policy available to a group of people. If several people associate with each other for a common goal, such as employment, travel, borrowing, etc. the group can avail a term life insurance, which is known as a group term insurance as it is taken by a group of people.
For example, employers provide group insurance coverage to their employees. If you are covered under a group insurance plan provided by your employer, the employer usually pays most (and in some cases all) of the premiums.
The employer can claim the premium amount as a tax-deductible expense, while the employees receive the financial safety umbrella. The amount of your group term cover can be up to 10 times your annual salary.
How Group Term Life Insurance Works?
Group life insurance policies are generally written as temporary insurance and are provided to employees who meet eligibility requirements, such as permanent employment or 30 days after employment. The availability of these term plans can be adjusted by appropriate life events or during open registration.
The average amount of coverage is usually equal to the annual salary of the combined work. Employers often pay most or all of the basic availability premiums. The additional value, usually multiplied by the employee's annual salary, is usually provided with an additional premium paid to the employee.
Features of Group Term Life Insurance Plans
Group term life insurance has many distinct features which benefit the employees covered under the plan and the employer providing the cover. Some of the prominent features are:
1. Cover by Default:Any new member joining the group is covered by default under the plan. The employers or the policy administrators will generally send quarterly updates to the policy roaster to the insurer. But any new employee joining the company will be covered by the group term plan from day one.
2. No Medical Check-up:New members joining the group term insurance plan, do not need to go through a medical check-up regardless of their age. It is generally assumed that being a part of the group the member has a stable health condition.
3. Credit Protection:Whenever you go for a new personal or home loan, the lender would require you to be covered by a group term plan. Thus, in the case of your unfortunate demise, the balance loan amount will be repaid by the insurer and your surviving family will not have to repay the debt.
4. Premium Payments:Premium payment in the group term life insurance depends on the decisions of the policy administrator. For example, your employer, bank, etc. They can decide to bear the burden of premium payments entirely, share with the insured, or pass the burden to the insured themselves.
5. Affordable Premiums:Group term life insurance premiums depend on the average age of the covered members. Therefore, a group with younger members would enjoy a lower overall premium than a group with more aged members. In both cases, however, the individual member premium can be lower than the individual term policy premium for the same member.
6. Coverage Limits:Group term insurance coverage limit depends on the employee’s salary and position. For the group of borrowers, the coverage will depend on the amount of the loan.
7. Policy Term:The usual policy term is one year for group-term life insurance. Thus, the policy owners will need to renew the policy every year. However, administrators can pay an advance premium for up to two years.
8. Policy Portability for Members:Some group term insurance providers offer portability of group term cover into individual term insurance policy when a member leaves the group. The premium amount for the policy may be different after porting. This feature is beneficial for the employees when they leave the organisation as they can continue providing financial safety to their families.
Benefits of Group Term Life Insurance to Employees
1. Insurance Cover
A group term insurance policy provides insurance coverage to members simply by being part of a group. It guarantees basic insurance to pay for those who do not have personal health insurance.
Employers are assisted in a structured way to build their future debt to pay employees. Group insurance policy helps employers alike as well as provides employees with life insurance with greater freedom.
3. Tax Benefits
Group term life insurance programs offer tax benefits to both employers and employees. As a general Tax Act, death benefits are tax-exempt under Section 10 (10D) of the Income Tax Act, 1961. In addition, group insurance schemes apply twice - for employee welfare and retention.
4. Customize to Meet Staff Needs
The integration of group term plans can be expanded with additions such as an education grant, a repatriation grant, accidental death and more, combining a number of benefits and basic coverage.
5. No Medical Examination
Employees do not have to go for medical examinations under the group term insurance plans.
6. Cost Effective
Since a group plan includes insurance coverage for most people, its premium is much lower compared to individual policies.
There is no doubt that a group insurance plan is a clever way to find insurance coverage for a wide range of risk factors, let alone health.
Benefits of Group Term Life Insurance to Employers
- Group term insurance policies are as helpful to employers as they are to employees.
- Employers are helped to fund their free funds easily under group insurance policies. Free payments are built on strategies to achieve the next payment, reducing the burden on the employer.
- Refunds will be made based on the performance of the funds selected by the customer.
- Group term life insurance plans in India are very economical because strategic management of the group is cheap.
- Better-performing investments will receive higher profits and reduce costs for the employer.
- Some programs provide employers with both life insurance covers and free benefits.
Group Term Insurance Benefits for an Informal Group
1. Paying Members' Premiums
With this program, you can choose to offer members of your group life cover by paying their premiums. Alternatively, members of your group can pay their own premiums while enjoying the lowest premium rates for the group program.
A person who pays a premium (either you or your members) may receive tax benefits in accordance with existing Income Tax laws.
* Tax laws are subject to periodic amendments.
2. Benefits During an Incident
Team members using the program receive a life cover benefit at a lower cost. In the event of a tragic incident, the program provides a number of death benefits to the nominee. This amount can protect you from debts such as loans taken by members.
Why should you Opt for a Group Term Insurance Plan in Addition to a Personal Life Insurance Policy?
Group term insurance plan has several benefits which your life insurance plan may not offer. Some of the important benefits are:
1. Cover Without Medical:Group term insurance covers you without a medical exam. That means, your physical attributes and medical history do not affect the premium cost of the cover.
2. Increasing Cover:Your total life cover should be about 10 times your annual income. Since your group term life cover is directly correlated with your income, it keeps growing as your income increases. This feature provides you with adequate coverage without having to buy a new term plan every few years.
3. Added Life Cover:Group term life cover after a personal life insurance policy can allow you to borrow without spending on a life cover. Usually, the lender will add a term life cover with your loan, especially with large loans like a home loan. The premium for this cover goes out of your pocket. With a group term life already available with your employer, you can avoid buying this cover.
Normally, all employees are automatically enrolled in the base coverage when they meet the eligibility requirements. Requirements vary and may include working a certain number of hours per week or part-time as an employee. Availability of the coverage of group-term plans varies. In some programs, registration is only available when a person starts working or at a relevant milestone of life, such as the birth of a child. For some plans, additional coverage can be added during open subscription time.
Enhancing the plan by adding riders or benefits may require additional underwriting. Usually, it is a simple and easy-to-write process, where the insured individual ascertains their eligibility rather than going for a physical examination. The employer can then decide whether to offer additional coverage or not.
Group term life insurance plans allow you to receive all the benefits of each program under the same contract. They also offer tax benefits and lower premiums due to the presence of the group. Therefore, they are quite a popular option, and Canara HSBC Life Insurance offers plenty of group term plans for employers to choose from for their company.
FAQs on Group Term Life Insurance
1. What are the minimum and maximum age criteria to be included in a group term
life insurance plan?
The minimum and maximum age to enter a group term life insurance range from 14 to 18 years and 69 to 85 years, respectively. The maximum age for the cover is usually limited to 85 years.
The tenure of a group term life insurance plan is one year. The plan can be renewed every year and the new premium will depend on the number of claims filed in the last year and net additions to the group.
The minimum sum assured under the group term life insurance plan can range between Rs 1000 to 5000.
Group term life insurance usually charges only a risk premium. Thus, they do not offer any maturity benefit or return of premium options. However, you can buy iSelect Smart360 Term Plan from Canara HSBC Life Insurance and avail return of premium option with your term insurance.
Yes, group term insurance plans also offer riders like critical illness, accidental death cover, etc. Adding riders can increase the premium of the group term policy.