What are the Benefits of a Group Term Life Insurance?


Thanks to rising awareness about the importance of term insurance, providing term life coverage to employees is becoming a common practice these days. What is group term life insurance? A group term life policy covers several members of an organisation under one master plan. A term insurance policy acts as a financial cushion for the employee’s family’s future in the event of an untimely demise. The coverage provided under the group term insurance plan may differ as per the position of the employees. Regardless, any member of the organisation can breathe a little easier knowing that if anything were to happen to them, their loved ones would be financially taken care of.

How does group term life insurance work? 

A group policy is managed and handled by the employer, also called the master policyholder. This individual is responsible for choosing the coverage that the employees will receive. They also decide the manner in which the employees will receive coverage. For instance, all members may receive uniform coverage, or they may receive differing coverage as per their salary/position within the company. There is a single sum assured within the plan, based on which the premium for each employee is decided. The premium also fluctuates as employees enter the company or leave it in large numbers.

Benefits of group term life insurance 

A well-designed group plan can be beneficial to the employee as well as to the employee. Here’s how:

For the employee: 

  • Default financial coverage 

If you are the primary earning member of your family, then you must have thought quite a bit about your family’s future in your absence. Being a part of a group term insurance is a good way of putting those thoughts and worries at rest. You can enjoy better peace of mind knowing that your family will get to live a life of financial dignity even in your absence.

  • Comparatively cost-effective

If one were to compare individual life insurance vs group term life insurance, one major benefit that the latter enjoys is affordability. Term insurance plans are generally affordable. Group term plans are even more so. There are some organisations that take on the entire cost of the premium so that the employee does not have to pay anything for the term life coverage.

  • Option to choose add-ons 

In many group insurance plans, the employee has the option to select an extra level of coverage by paying minimal costs. This does not affect the base coverage provided by the master policy, which remains the same. The employee can choose add-ons to their base policy, such as critical illness or accidental disability rider. Thus, the employee receives financial protection not only from an untimely death but also from several unfortunate events in life.

  • No medical tests required 

Another benefit to be considered if one is comparing individual vs group term life insurance is that the latter does not require a medical check-up. In an individual plan, you may have to undergo a medical test, especially if you are over 40-50 years old.

  • Tax benefits 

The death benefit pay-out that the beneficiaries receive is exempted from any taxation as per Section 10 (10D) of the ITA, 1961.

For employers:

  • Helps in retaining employees

The significance of term insurance cannot be underestimated in these uncertain times. Therefore, an employee is more likely to continue working in an organisation if they receive good term life coverage. This helps in reducing the employee attrition rate to a great extent.

  • Increases productivity

When an employee knows that their organisation is securing the future of their family, they are more likely to be committed to their jobs. The improved peace of mind due to the group term life insurance also helps in increasing productivity and reducing stress.

  • Affordable term insurance 

Since employers are buying coverage for multiple people from one insurer, they receive considerable discounts. The costs involved are comparatively lower. This helps the employer to enjoy tax benefits and a reduced attrition rate without incurring financial expenses to a large extent.

  • Tax benefits 

As per Section 37 (1) of the Income Tax Act, 1961, an employer can benefit from tax exemptions on the premiums paid for the group term insurance policy.

If you have any queries or want to know in-depth about what your master group term life insurance is like, reach out to the HR department of your organisation.