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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.
Certain group insurance schemes also include coverage for outstanding loans for a group of borrowers, as well as critical illness and disability benefits.
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.
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
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 -
- Easy to use tech-enabled Pazcare dashboard for HRs to manage and administer your policy in one place.
- Paz app for mobile - employees can use this app to manage their policy
- Free wellness sessions for employees
- Dedicated account managers
- 24X7 customer support.
Have questions? We are more than happy to help. Get in touch with us.
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