Group term life insurance benefits - Benefits for employees and employers

Group term life insurance plans are intended to provide life insurance coverage to a collective of individuals through a single policy, as implied by the name. 

‍Although commonly associated with employer-employee groups, group insurance policies can also encompass other groups such as bank customers, NGOs, professional associations, non-banking financial institutions, and microfinance institutions.

By providing financial support and independence to the dependents of the policyholder in the event of their death, a group insurance policy for employees offers various benefits. These benefits can range from a uniform cover for all members to graded covers for different tiers of employees. 

The primary goal of a group term life insurance plan is to offer financial protection to the dependents of the insured in the event of their untimely death. These policies provide flexibility too, coverage can be uniform for all members or tiered based on designation, seniority, or salary slabs.

Beyond group term life insurance cover, many insurers today enhance these plans with value-added benefits, including:

• Loan protection cover – Outstanding loans of a group of borrowers are settled in case of death.
• Critical illness cover – Lump-sum benefit on diagnosis of life-threatening illnesses.
  
• Accidental disability benefits – Financial support if an employee suffers permanent or partial disability.
• Terminal illness benefit – Early payout upon diagnosis of terminal illness.
• Conversion option – Some plans allow employees to convert group cover into individual policies when leaving the organization.

Features of group term life insurance

Group life insurance policies come with a unique set of features that make them different from individual term plans. Some of the key features include:

1. Single master policy
   The employer purchases one master policy that covers all eligible employees under the same contract.
2. Uniform coverage or salary-Linked
   Coverage can either be a fixed sum assured for all employees or linked to their salary/hierarchy (e.g., 2x or 3x of annual CTC).
3. Employer-funded or shared premiums
   Employers may fully sponsor the premium or choose a cost-sharing model with employees.
   
4. Instant enrolment
   Employees are automatically covered from the day they join the organization, ensuring immediate financial protection.

For employers, offering group term life insurance enhances the employee benefits package, boosts loyalty, and strengthens workplace morale. For employees, it offers affordable protection and peace of mind without the hassle of individual underwriting.‍

Also read: An ultimate guide to group term life insurance

Group term life insurance as employee benefits

Employers often offer group term insurance as a component of employee benefits, with many major corporations providing complimentary group term insurance to their entire workforce while also allowing them to tailor and augment their plans with additional riders at a minimal cost. 

‍The specific coverage provided can vary depending on the policies of individual companies. Typically, employees aged between 18 to 60 are eligible to enroll in the group term insurance policy.

Group term insurance offers a lump-sum payout to the nominee/family of the insured employee if they pass away during the term of the policy. 

‍In the case of group term policies, the employer purchases the policy for the employees, with the latter's family members designated as the beneficiaries/nominees. As the policy is purchased for a large group, the premiums are generally less expensive compared to individual term insurance policies.

‍Read: Group term life insurance vs Life insurance

‍While some employers offer group term insurance to their employees at no cost, others contribute a portion of the premiums, with the employees paying the rest. 

The death benefit paid is determined based on the employees' hierarchy, and employees can customize their term insurance plans as per their preferences. 

Group term insurance provides several benefits to both employers and employees. Let's explore them in detail:

Group term life insurance benefits

For employees: 

‍Financial Coverage to the employee's families:

The families and nominees of employees receive financial coverage through a group term insurance plan, which gives the employees a sense of relief, knowing their family will have funds in the event of their unexpected demise.

Cheaper premiums:

Typically, employers pay for group term insurance policies, resulting in employees receiving the coverage for free. In cases where employees pay a portion of the premiums, the cost is generally low as group term insurance premiums are more affordable.

Read: Group term life insurance premium calculation

‍Tax-Free death benefit:

As per Section 10(10D) of the Income Tax Act 1961, the death benefit paid out to the insured’s family or nominee is entirely tax-free.

Additional riders:

Employers offer their employees the option of adding supplementary riders, such as critical illness coverage and accidental death benefits, at discounted prices, enabling employees to obtain the necessary coverage.

‍No Medical tests needed: 

Generally, employees are not required to undergo medical tests to qualify for term life insurance under a group term policy.

Mental peace & motivation:

Knowing their family’s future is financially secure allows employees to stay more focused, motivated, and loyal at work.

‍For employers: 

‍Affordable term insurance:

Purchasing group term insurance policies in bulk results in significantly lower premium costs for companies, allowing them to offer term insurance benefits to employees at a reduced expense.

Reduced employee turnover:

Group term life insurance for employees is a significant employee benefit that many employees value. Providing group term insurance to employees helps to ensure their commitment to their jobs.

‍Tax advantages:

Under Section 37(1) of the Income Tax Act, 1961, companies or employers can take advantage of tax exemptions on the premiums paid for group term insurance.

‍Read: Tax benefits of group term life insurance

Customizable plans for employees:

Employers can tailor policies by hierarchy, salary bands, or risk categories, ensuring flexibility while still managing costs effectively.

Conclusion

Group term life insurance is more than just a financial safety net; it's a valuable employee benefit that enhances workplace wellbeing while helping employers build loyalty and reduce attrition. With affordable premiums, tax advantages, and customizable coverage options, it creates a win-win situation for both employees and employers.

Group term life insurance from Pazcare

Group term life insurance from Pazcare is an affordable group insurance policy for employees. The policy comes with all the above-listed benefits for both employees and employers of an organization. Not only that the other benefits you receive by buying a group term life insurance policy from Pazcare are -

1. Easy to use tech-enabled Pazcare dashboard for HRs to manage and administer your policy in one place.
2. Paz app for mobile - employees can use this app to manage their policy
3. Free wellness sessions for employees
4. Dedicated account managers 
5. 24X7 customer support.

‍Have questions? We are more than happy to help. Get in touch with us