Group Term Life Insurance

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The following types of groups can purchase group term life insurance on the lives of the group members:

  • Employer-employee
  • Consumer Groups
  • Associations for their Members
  • Non-Profit Organisations
  • Other Self-interest groups formed for a purpose other than to avail a group of insurance

An employer can purchase a group term life insurance policy for employee groups

In the case of an employer purchasing the policy, certain conditions apply:

  • Only full-time, permanent, or active employees are eligible
  • An employee must be 18 years and older, or 70 years and less
  • To be considered active at work, the employee should be performing regular duties at work. Any employee on long leave due to health reasons (unrecognized by the company) does not consider eligible
  • An employee absent from duty due to sickness, injury, or maternity leave, may consider active. He/she requires to submit a health declaration at the time of registering for the policy

A non-employer-employee group can be insured, subject to conditions imposed by IRDA

A non-employer-employee group can be the same bank account holders, members belonging to a social organization, or people having the same occupation as a group of journalists, lawyers, or doctors.

However, the need for an insurance policy should be incidental and not for the purpose of obtaining just insurance.

The protocol is the same, a single policy can issue to cover homogeneous members. There will only be one master policyholder in any case. The rest of the members clearly need to specify their relationship with the master policyholder, to be eligible.

Case on Eligibility of Buying Group Term Cover

Automile is an automobile parts supplier company. The company has registered offices in Delhi, Pune, and Jaipur. It also delivers parts to motorbike dealers, car dealers, and commercial vehicle dealers in neighboring cities.

Automile has an active employee base of on-site managers, office managers, sales workforce, and people in its head office in Delhi. Considering that its twin offices-Pune and Jaipur are integral to the company’s growth, the Human Resource managers of Automile (headed by Ritesh) decide to cover the workforce under a single group term life policy.

Ritesh can only include permanent employees. If he has temporary recruitments like drivers, and laborers, suppose 20 in number. They don’t entitle to the group term benefits.

Still, Ritesh has the option to cover his key employee base, by giving them a life-term loyalty bonus. The firm can also buy a separate policy for the Delhi team, depending upon his exact requirement and the people to be insured.

Additional read: How to buy a Group Term Life Insurance

Automile also supports an NGO, Naee Kiran under its CSR responsibility. The NGO supports underprivileged children through education and skill development. Naee Kiran currently employs more than 50 volunteer workers throughout the year, and about 150 volunteers may join once or twice a year depending on availability.

Naee Kiran is considering a term cover for all the employees including the seasonal volunteers. But the insurer informs that only full-time workers can cover under the policy, and seasonal volunteers can cover under workmen’s compensation insurance or may not cover at all.

The insurer explains that the volunteers are part-time workers and cannot be covered under a group policy. Also, the NGO has no control or knowledge about the life risks faced by the volunteers outside. The administrative cost of including such workers will be quite high and will increase the premium for all the workers if included in the same policy.