Group Term Life Insurance

> The Benefits of Group Term Life Insurance
> Quick Guide to Group Term Life Insurance
> Frequently Asked Questions
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The Benefits of Group Term Life Insurance

Comprehensive Cover

Group term life insurance covers death benefit and also provides options to cover additional riders such as permanent disability (total and partial) and critical illness at an additional premium.

Graded Sum Insured

Options to cover multiple sum insureds under our group term insurance plan. Coverages can vary by grade, designation, number of employees, gender, profile of work, industry, salary and retirement age.

Increase in Sum Assured

Option to increase the sum insured under group term policy during the year due to salary hike, promotions or other reasonable reasons, without changing the definition for the cover for the group.

Fast Claim Settlement

Easy and prompt claim settlement within specified turn around times. All aspects related to claims such as faster communication, timely submission of claim documents to insurers are handled by experts centrally.

Quick Guide to Group Term Life Insurance

Definition of Group Term Life Insurance Plans

A group term life insurance scheme is a group insurance scheme which provides death benefits to an employee’s nominee. In the case of death of an employee, either through accident or natural causes, the nominee would get the lump sum insured under the plan.

Functioning of a Group Term Life Insurance

A group term life insurance plan is ideal for organizations that decide to monetarily secure their employees’ families. Below are the basics of how a group term life insurance works.

Employer has to choose an amount of term insurance cover or the sum assured for their employees
Employer has to decide if any rider has to be offered
Employer selects an insurer based on the premium quotes, claim settlement ratio and coverages
The group administrator receives a master policy upon making the initial payment towards the group term life insurance policy
Once the premiums are paid, the policyholder gets a coverage for a year from the date of commencement of the policy
Alterations to the policy such as addition or deletion of members are possible. Pro-rata premium is charged for the duration of coverage for the employees
Group term life insurance policies can be renewed annually

Features of Group Term Life Insurance Policy

A group term life coverage plan has the following features:

Employees can be added anytime during the policy is active
A pre decided sum insured is paid to the beneficiary in case of an unfortunate death of the insured employee
Add on covers are given as riders that safeguard an employee against critical illness, accidental deaths, permanent disabilities and so on
Application and claim processing is fast and simple
The minimum size of a group should be of 7 members to avail a group term life insurance plan
A few insurers provide cover for terminal illness and that could be an added advantage
Cost effective coverage and less expensive than any individual term life insurance cover available
A free cover limit is granted in all the plans. This allows coverage without any medical check-up of sum assured up to the free cover limit.

Benefits of Group Term Life Insurance Policy

For employees –

Default insurance cover – Employees that do not have a personal life insurance cover will be highly benefited.
Hassle- free – Obtaining a group term life insurance policy is easy, you do not require medical tests up to the free cover limit or a lot of documentation.

For employers –

Gratuity Funding – Group term life insurance aids in funding the gratuity liability for the employers that is accumulated towards gratuity benefits for an employee. Some plans offer the employer a gratuity benefit along with a life insurance cover.
Tax Benefits – Death benefits, as per prevalent law, are exempted from tax deductions under Section 10(10D).
Higher loyalty – When employers think for the health and well-being of their employees, it has proven impact of loyalty from the employees.

Eligibility of Group Term Life Insurance Policy or Plan

Below is a list of entities eligible to obtain a group term life insurance policy for their employees:

Employer - employee
Banks
Non-banking financial institutions
Micro finance institutions
Other professional groups

The eligibility criteria vary by type of the group. Some of the common criteria are:

The minimum number of members in the group should be 7
Minimum age limit of the group is 18 years
Maximum age limit ranges between 65 to 69 years

Frequently Asked Questions

A group term life insurance is taken by an employer to provide cover for an employee’s family in an unfortunate case of death of the employee. It’s created with an intent to support the family of the insured when they are gone.

> A group term life insurance plan is created with the consent of the employer, so an employee may not have much control on the individual coverage and other benefits associated with the plan.
> The group term life insurance plan is active as long as one is a member of the group, so it is not transferable and ceases to exist when an employee leaves the organization
> Risk is distributed in case of a group term life insurance policy, so a healthier individual also pays similar kind of premium as compared to someone at a higher risk
> Most people need additional coverage to compensate for the coverage that is not part of their group term life insurance policy taken by the organization

A group insurance policy intends to provide insurance to all the employees of the organization under a single plan. All the formalities, during the purchase of such an insurance, are completed by the employer. Whereas, an individual life insurance, as the name suggests, covers a single person (you and in some cases, your spouse). These have to be bought by self, premiums need to be paid for a certain tenure (typically more than 3 years) and the coverage can last for a period of 10 years or more, whereas group term insurance is generally an annual plan. Another major difference is that the rates for an individual term plan are fixed while for a group plan it can be negotiated based upon the group size and claim history.

> Accidental death benefit riders can help you avail increased sum assured in case of accidental death of the insured
> Accidental disability benefit riders can provide the insured with financial help with the sum assured in case of partial or permanent disability due to accidental injuries
> If the insured suffers from a terminal illness like: cancer, asthma, kidney ailments, lung damage, etc. then the accelerated death benefit riders provide sum assured in advance that helps the insured and their family for the treatment
> With critical illness benefit riders, the insured is eligible to receive a lump sum amount on diagnosis of a critical illness covered as part of the policy
> Income benefit riders can be purchased on extra premiums and can serve as a source of additional income in case of a misfortunate event of death of the policyholder
> Child support benefit riders pay for your child’s upbringings and educations in case of the unfortunate demise of the parents

For a basic term life insurance plan, there is no moneyback. This is a risk cover plan. So, all the premium is paid towards covering the mortality risk. There is no fund accumulation in a group life insurance plan.

The tenure of a group term life insurance plan is 1 year. Every year you can plan on renewal or change in coverage to the plan. Addition or deletion to the list can happen on a monthly basis.

A group policy is not transferable. So, your group term life insurance cover ends when you leave the organization.

The death benefit provided to the beneficiaries of an insured as per a group term life insurance policy is 100% of the sum assured. And as per prevailing laws, death benefits are exempted from tax under Section 10(10D), so there is tax exemption for both the employer as well as the employee.

Group term life insurances do not have any cash value. When the policy ends, the employee or the beneficiary does not receive any cash. A GTLI is non-transferrable so they do not get carried forward when an employee changes an organization. GTLIs just have death or disability benefits associated with them for very less premiums charged.

As per prevailing tax laws and Section 10(10D), group term life insurances that offer death benefits carry tax benefits. Death benefits are exempted for any taxes.

Term life insurance cover is one of the most common types of group life insurance cover prevailing in the market. Group term life insurance covers are provided as yearly renewal term insurances. Most leading insurers provide a group term life insurance cover. The top 5 are: ICICI Prudential, Max, Aditya Birla, Kotak and SBI.

Yes, as an employer you can buy multiple group term life insurance policies. However, always disclose the sum assured criteria across all your plans. Insurers have a limit of sum assured that they want to extend based upon their underwriting criteria.

You can have multiple term life insurance policies. As a part of an organization, you could be covered. At the same time, you can buy an individual term as well.

The minimum age for enrolling into a group term life insurance plan is 18 years.

The maximum age to enroll into a group term life insurance plan varies by plan. Typically it is 59 years. And the maximum age at which the policy expires is 70 years.

For sum assured up to the free cover limit, there is no medical check-up. For people with sum assured higher than the free cover limit, the medical check-up is decided based on age, sum assured and gender.

In case of the death of an employee, the following has to be taken care of:
> Claim form to be filled by the beneficiary
> Certificate of insurance should be available
> Original death certificate of the insured should be produced
> Address proof of the claimant is required
> Photo ID proof of the claimant is required
> Canceled cheque or a bank pass book detail is required for transfer of the amount to the beneficiary’s account
> Other documents such as a post-mortem report, an FIR copy of the accident will be required wherever it is applicable

Yes, you can claim your term life insurance policy from two companies. It is legal. An individual who has bought a policy elsewhere (out of the group), makes regular payments for the same, does have the authority to avail benefits from both his group policy and individual policy outside of the organization. An individual can also buy multiple term life insurance policies from different insurers, pay regular premiums to be able to reap benefits from those policies.

Insuropedia

What affects the Premium of Group Term Life Policies?

A Group term policy is purchased by an organization, to cover a minimum number (group) of employees. The very nature of this policy affects the premium amount. An employer usually chooses to cover all insured members under the same risk and therefore, pays a lump sum premium to the insurance company. It means

Why Premiums Are Lower in Group Term Policy Than Individual Term Policies?

The premiums for the group term policies are dependent on various factors, like number of people insured in the group, the average sum insured per person, average age of the group members, occupational risk of the group, etc. Insurance premium consist of three components: Risk Premium Loading for Office Expenses Investment

How to decide coverage under the Group Life Insurance Policy?

The employer can choose different benefit calculations to determine the amount of coverage for the employees. For group insurance contract, employees are assigned to different classes and schedule of benefits are attached to different classes that determine the amount of coverage that will be provided to the employee of each

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