Group term life insurance policy is a benefit that many companies offer to their employees. It offers an affordable way for employees to secure the financial future of their family in case of an unforeseen incident. A group term life insurance policy provides coverage for a group of people, typically employees, under a single contract.
Being a part of a company that provides its employees with a group term life insurance policy can be a lifesaver. It is a great way to ensure that the employee's family is taken care of financially when they are no longer with them.
What is group term life insurance?
Group term insurance plan is a type of insurance policy that provides coverage for a group of individuals. Employers usually offer group term life insurance as a benefit to their employees. The primary purpose of this policy is to provide financial protection to the beneficiaries of the employees in case of their untimely demise. The coverage for this policy is temporary and ends after a specific term. The premiums for group term insurance plans are typically lower than other policies due to the group nature of the insurance. Group term insurance is a valuable benefit that can help provide peace of mind to employees and their families.
Key features of group term life insurance
Group term life insurance benefits and features include the following:
1. Death cover:
The primary feature of the group term life insurance policy is the death cover. This cover provides financial coverage to the nominee in case of the employee's unfortunate demise, ensuring their family’s financial stability and protection from sudden loss of income. It helps dependents manage expenses like household costs, children’s education, and outstanding debts.
2. Gratuity benefit:
Gratuity benefit is another feature of a group term life insurance policy. It provides a lump sum payment to the employee who has served the company for a specified period, acting as a financial reward for long-term service. This benefit helps employees plan their retirement better and secure their financial future after leaving the organisation.
3. Group credit protection plan:
A credit protection plan is a feature that provides financial coverage to the group if any of the members cannot repay their loans due to unforeseen circumstances like death or disability. This ensures that the burden of repayment does not fall on the borrower’s family, protecting them from financial distress and legal complications.
4. Comprehensive coverage:
It protects the group from multiple risks such as sudden death, accidental death, and critical illness. This ensures financial security for employees and their families by covering unexpected medical expenses, treatment costs, and loss of income due to severe health conditions. It provides peace of mind, knowing that they are financially protected against life’s uncertainties.
Key benefits with group term life insurance
Group term life insurance policy serves as a cost-effective way for employers to provide valuable financial protection, enhancing overall employee well-being.
- Financial security for employees' families: Group term insurance ensures that in case of an employee’s unfortunate demise, their family receives a lump sum payout. This financial support helps cover daily expenses, education costs, and outstanding liabilities, providing much-needed stability during difficult times.
- Affordable premium rates: Since the policy covers multiple individuals under a single plan, the premium rates for group term insurance are lower compared to individual life insurance policies. Employers can provide substantial coverage to their employees at minimal costs, making it an economical benefit.
- Customisable coverage options: Organisations can customise the group term insurance policy based on their workforce's specific needs. Coverage can include accidental death benefits, critical illness riders, disability protection, or additional payouts, ensuring comprehensive financial protection.
- Tax benefits for employers and employees: The premiums paid for group term insurance qualify for tax benefits under the Income Tax Act. Employers can claim deductions on the premium paid, and employees may receive tax-free death covers, making it a financially beneficial option for both parties.
- Gratuity and employee retention: Some group term insurance policies integrate gratuity benefits, rewarding employees for their long-term service. This enhances job satisfaction, boosts morale, and improves employee retention rates within the organisation.
- Easy enrolment and hassle-free claim process: Group term insurance policies have a simple onboarding process with minimal documentation. In case of a claim, the payout process is streamlined, ensuring quick financial support for the nominee without unnecessary delays.
Also, check: Savings plans
How group term life insurance benefits your employees?
Here are some group life term insurance benefits that employees can enjoy:
1. Financial coverage:
Group term life insurance provides financial security to the employee's family when they need it the most.
2. Lower premiums:
Group term insurance premiums are cheaper than individual life insurance policies, as the cost of coverage is spread among the group.
3. Tax benefits:
Group term insurance provides tax benefits to the employee, as the premium paid for the policy is tax-deductible.
4. Add-ons:
Group term insurance policies provide add-ons such as critical illness cover and accidental death cover, which can benefit the employee and their family in case of any unfortunate event.
5. No medical check-up:
Employees can get coverage under a group term insurance policy without undergoing a medical check-up, which saves them time and money.
Key advantages and disadvantages of group term insurance
Here is a quick overview of the pros and cons of group term insurance:
Advantages |
Description |
Disadvantages |
Description |
Affordable premiums |
Group term life insurance is cost-effective as the premiums are lower compared to individual policies, making it a budget-friendly option for employers and employees. |
Limited coverage |
The coverage amount may not be sufficient to meet all financial needs, requiring employees to buy additional personal life insurance. |
Financial protection |
Provides financial security to the employee’s family in case of untimely demise, helping cover expenses like debts, education, and daily needs. |
No ownership of policy |
Employees do not own the policy, and coverage is lost if they leave the organisation, making it unreliable for long-term security. |
Easy enrolment |
Employees are automatically enrolled with minimal paperwork and no medical tests, ensuring hassle-free access to coverage. |
No customisation |
Group policies offer limited flexibility, with standard coverage that may not suit individual financial goals or specific protection needs. |
Tax benefits |
Both employers and employees can avail tax benefits on premiums and payouts under applicable income tax laws. |
Coverage depends on employment |
The policy remains active only while the employee is part of the organisation, leading to gaps in coverage after job changes. |
Benefits of group term insurance for employers
Here are some benefits of group term insurance for employers as well:
Reduces employee attrition:
Employers who offer group term insurance to their employees tend to have a lower attrition rate than those who do not. Employees feel more secure and valued when their employer takes measures to ensure their financial security, leading to higher job satisfaction and long-term retention.
Boosts employee performance:
A happier and more secure employee tends to be more motivated and productive, which can benefit the employer's overall performance. With reduced financial stress, employees can focus better on their work, improving efficiency and workplace morale.
Builds credibility:
Offering group term insurance can help build a company's credibility and reputation, which can attract new employees and customers. Providing such benefits reflects a company’s commitment to employee well-being, enhancing employer branding and positioning the company as a responsible organisation.
Enhances employee benefits package:
Adding group term insurance strengthens an organisation’s employee benefits package, making it more attractive to potential hires. A comprehensive benefits plan gives employers an edge in hiring and retaining top talent in a competitive job market.
Provides tax benefits:
Employers can avail tax deductions on the premiums paid for group term insurance under applicable tax laws. This reduces the financial burden on the organisation while ensuring employees are covered.
Encourages employee loyalty:
Employees appreciate organisations that invest in their well-being. Providing financial security through group term insurance fosters trust and loyalty, reducing turnover and improving workplace culture.
How does group term insurance work?
A group term insurance policy covers a group of people under a single contract. The employer arranges for the insurance company to provide coverage for its employees. Typically, the employer pays the premium, and the employees are beneficiaries of the coverage.
The premium for a group term life insurance policy depends on the age, occupation, and salary of the employees. This premium is usually cheaper than that of individual life insurance policies. However, the coverage amount may not be as comprehensive as individual policies.
Key factors that affect the group term life insurance
Following are the key factors affecting group term life insurance:
- Size of the group: The number of employees covered under the policy impacts the overall premium and benefits. Larger groups often get lower premium rates due to risk distribution.
- Average age of employees: Younger employees generally reduce the overall risk for insurers, leading to lower premiums, whereas an older workforce may increase costs due to higher mortality risks.
- Coverage amount: The sum assured for each employee influences the premium. Higher coverage results in higher premiums but provides better financial security.
- Health conditions of employees: Although group term plans do not require medical tests, insurers assess the overall health profile of the group, which can impact policy costs and coverage terms.
- Type of coverage and riders: Additional benefits such as accidental death, disability cover, or critical illness riders increase protection but also raise the premium amount.
- Employer’s contribution: The extent to which the employer funds the policy affects the cost structure. Fully employer-funded plans tend to have higher participation rates.
- Policy tenure: The duration of the group term life insurance plan affects premium costs, with longer-term policies offering more stable pricing structures.
- Claim history of the group: A group with a history of frequent claims may face higher renewal premiums, while a low-claim history can help maintain affordable rates.
Eligibility criteria for group term insurance
The eligibility criteria for group term insurance include the following:
- Companies must have a minimum of 10 employees to be eligible for a group term life insurance policy.
- Employees must be between the ages of 18 and 65 to be eligible for coverage.
- Employees must be on the company's payroll to be eligible for coverage.
How to get group term life insurance?
Here are the steps to follow when buying group term life insurance.
- Research and identify insurance providers: Look for insurance companies that offer group term life insurance policies. Compare different insurers based on their policy offerings, claim settlement ratios, and customer reviews.
- Evaluate the insurer’s reputation and financial stability: Check the company’s financial strength, market reputation, and history of claim settlements. A financially stable insurer ensures reliability in claim payouts.
- Analyse policy features and coverage options: Assess the key features of the policy, including death benefits, riders (such as accidental death or critical illness cover), premium structure, and exclusions to ensure it meets the organisation’s needs.
- Determine the sum assured and premium structure: Decide on the coverage amount for employees and the premium contribution model—whether it will be employer-funded, employee-funded, or shared. Ensure affordability while maintaining sufficient coverage.
- Verify the eligibility criteria: Check the insurer’s requirements regarding the minimum and maximum number of employees, age limits, and employment tenure to ensure all eligible members can be covered.
- Gather and submit required documents: Collect necessary documents such as employee details, company registration proof, and financial statements. Submit the completed application form along with the required paperwork for policy issuance.
- Review terms and conditions before finalising: Carefully read the policy document, including exclusions, renewal terms, and claim procedures. Seek clarification from the insurer if needed before signing the agreement.
How to apply for term life insurance on Bajaj Finance Insurance Mall?
Here’s how you can apply for term life insurance plans on Bajaj Finance Insurance Mall.
- Visit the Bajaj Finance Insurance Mall
- Choose a life insurance plan and click on ‘Get Quote’.
- Enter personal and other details like how much you want to invest, name, mobile number etc.
- Enter a few additional details like your source of income, lifestyle etc.
- Upon entering all the details, you will view all plan details. Click on ‘Buy Now’ to proceed.
- Bajaj Finance representatives will call you back to explain the product details and help you buy a plan that suits you best.
Group term life insurance is a great way to ensure that employees and their families stay financially secure in case of an unfortunate event. There are multiple benefits of having a group term life insurance policy for both employers and employees. Companies that offer group term life insurance to their employees show that they care about their employees' financial security.
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