Have you heard of group-term insurance plans? These are life insurance plans that companies, employers, and organizations usually provide to their employees. These plans are prevalent amongst professionals as they come with their fair share of benefits. Here’s learning more about the same.
What is Group Term Life Insurance?
As you may already know, individual term insurance plans offer coverage for the policyholder’s life. They offer a death benefit payout to their nominees in case of their unfortunate demise within their respective policy’s term. When this kind of life coverage is given to an entire group of individuals under one policy, it is known as group term life insurance. The policy is known as the master policy.
Thus, group term life insurance is issued as a single contract that provides coverage for a group of individuals engaged in the same occupation or organization. The terms and conditions depend on specific attributes/characteristics of any such group and are equally applicable to everyone. The master policy integrates the contract between the insurance provider and legal organization/entity, such as trustees, employers, associations, etc. This outlines the group of lives that will get coverage, the contributions, benefits, and other terms and conditions.
Some of the key features of group term insurance plans are:
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These policies are only provided to registered groups, i.e., unions, associations, trusts, employer-employee entities or groups, banks and holders of accounts, and so on.
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Insurance companies issue these policies for one year, and they are renewable thereafter.
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Premiums may be paid by individual members or the group as a whole based on the master policy document.
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The sum assured will depend on the position, income, type, and age of the group members, among other factors. The group may also select a uniform amount for all members.
Main Benefits of Group Term Insurance Plans
These policies come with various benefits for group members. Some of them include the following:
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Easy availability of insurance coverage – Being a member of any such group guarantees access to life insurance coverage. For example, if your employer purchases a group term life insurance plan for its employees, you will automatically receive this coverage if you are eligible. This is one of the most significant advantages of these plans, i.e., you do not have to go through the application process for life coverage at an insurance company.
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Comparatively reasonable premium amounts – Since the premium accounts for the entire group of members, your individual payable amount automatically becomes quite affordable. Suppose the master policyholder (like the employer/company) pays the premium for its employees; in that case, you are not required to pay anything on your account.
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Tax Deductions – If you are paying premiums for these plans, you can claim tax benefits too. These are applicable under Section 80C of the 1961 Income Tax Act. You can get benefits up to Rs. 1,50,000 in this case. The death benefits of these policies are also tax-free as per Section 10(10D) of the Income Tax Act. This implies there are no deductions from the sum assured payouts to nominees of group members.
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Added Advantages – Group term insurance plans are a must-have in any employee benefits package offered by a company. It provides an additional sense of security to the employee when given as an incentive/perk by the employer.
Some Things That You Should Note
There are a few aspects of group term insurance plans that you should keep in mind. These include the following:
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The coverage will only apply till you are a member of the group in question
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It may apply only until the group chooses to keep the coverage and policy active
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You cannot select your desired sum assured and other factors in such plans
Hence, experts recommend opting for individual term insurance, despite being part of a group life insurance plan. This will fill the coverage gaps while ensuring sizable financial safety for your family in case of your unfortunate demise within the policy period. You can also choose sufficient coverage as per your requirements in this case. Like always, you can use a term plan calculator to determine the coverage amount and premium payable in this case.
Group life insurance does have its fair share of benefits for members. However, individual term plans are also necessary, as outlined above. A balance between these types is an ideal scenario for every modern-day professional/employee.
