Group Term Life Insurance: Which are the Best Group Term Insurance Plans in India?
Group Term Life Insurance: An Overview
Term Life Insurance is one of the most famous life insurance policies in India. In this kind of policy, a death benefit is provided to the insured by the insurance company, i.e., during the mentioned period of the term in the policy, if the insured dies, the insurer will pay the specified amount to the beneficiary/nominee mentioned in the policy. But, if the insured survives, then the insurer does not have to pay any amount to the insured or its beneficiary. Term life insurance is one of the most affordable options among various types of life insurance policies. It is also the simplest form of life insurance policy. People are aware of this policy but not many of them know that you have the option to invest in it as a group. This article will cover the Group Term Life Insurance meaning, its features and benefits, and the top available options for you.
What is a Group Term Life Insurance?
As the term suggests, a Group Term Life Insurance is a policy offered by various organizations which covers a group of individuals in a single contract. Generally, this is opted by companies for their employees to make the work easier and faster. But, here a group can be any set of people, be it from a company, a society, or any set of groups of borrowers. This policy offers various features. Its main feature is to provide insurance to you and keep your family safe in case of your unexpected demise within the term plan.
Companies also opt for this policy to retain their employees. In this policy, the policy comes with a master plan and is applied to all the individuals of the group which bought the policy. And, there is a master policyholder who is assigned to act as a central administrator on behalf of all the people of the group to manage the policy.
There are different types of this plan. Some offer the same policy to be applicable for all, whereas some offer cover against the loans taken by the group members. There are also plans in which the group members can add riders such as accident benefits and critical illness. In contrast, some offer special advantages to certain people of the group with the higher designation. The group must decide what kind of policy they are willing to buy which would benefit them all. All the terms and conditions are discussed while the policy is being prepared and once signed, there is no going back.
The following groups are eligible to buy a group term life insurance plan:
- Employee - Employer groups
- Banks
- Non-employer - Employer groups
- Microfinance institutions
- Professional groups
- Non-banking financial institutions
How Does Group Term Insurance Work?
- Firstly, a group is formed and an administrator is selected.
- Then, a master policy is issued to the group administrator and he has to pay the initial premium on behalf of all the group members.
- The payment covers the entire group for a tenure of 1 year.
- The group members choose the sum assured which can be paid either in a lump sum amount or can be linked to their bank account/salary account/loan account or any other form of account.
- The premium is then charged based on the plan details, considering the type of policy the group has opted for.
Features of Group Insurance
There are various features of the plan. Such as the following:
- Death Payout: When a member of the group dies within the term period, the beneficiary/nominee of the insured receives the total guaranteed amount.
- Premium payment: It varies from group to group. In many cases, the employer pays for the premium and in some cases, the employee has to pay from his/her salary.
- Seasoned Fund Managers: Professional fund managers of the insurance company manage the funds with their in-depth knowledge of the market.
- Gratuity benefits: A lot of these policies offer gratuity payments to the group members of the company.
- Credit protection: Banks have the option to opt for a group credit protection plan to protect themselves from unexpected financial loss such as unpaid loan debt.
- Master Contract: There is one master contract that covers the life insurance of the entire group.
- Premium amount: Can be the same for all, can vary too. Depends on the policy the group opts for. The total premium amount increases as the number of people in the group increases.
- Tenure: Typically the policy is for a year, which needs to be renewed every year.
- Portability: The policy is connected to the group. As soon as a member leaves the group, the policy is no longer applicable to him. Although, some groups can offer the person to convert it into an individual insurance policy or the person can buy a separate policy for himself.
Benefits of Group Insurance
There are various benefits of group term life policy. Some are as follows:
- Death Payout: When a member of the group dies within the term period, the beneficiary/nominee of the insured receives the total guaranteed amount.
- Default Insurance Coverage: The policy covers the entire group and it covers you by default when you become a part of the group irrespective of your other policies.
- Gratuity funding: Employees can enjoy a sum of pooled money for their gratuity if their policy offers this feature in which it saves a part for the gratuity funding.
- Tax Benefits: Death benefits are tax-free according to section 10 (10D) of the Income Tax Act of 1961.
- Customizable as per needs: The policy can be customized based on the needs of the group members. Some policies offer the flexibility to even add riders which are add-on covers such as accidental death.
- No medical check-ups needed: Employees are relieved from the burden of medical checkups for the policy.
- Budget-friendly: Since the policy is opted by a group and covers many individuals, the plan’s premium is much lower.
- Employee retention: This is a benefit to employers as the policy can act as an employee retention mechanism.
Key Takeaways
- A group term life insurance is a type of term life insurance opted for in a group.
- There is a death payout to the beneficiary/nominee of the individual who dies within the term period.
- Death benefits are tax-free under section 10 (10D) of the Income Tax Act.
- By default, the policy covers a person when he joins the group, and is not applicable immediately after leaving the group.
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Best Group Insurance Policy in India
Various organizations offer this policy. A couple of the most popular ones are as follows:
- Bajaj Allianz Life Inurance Group Term Insurance:
This policy is offered by the Bajaj Allianze group and it provides up to Rs. 1 crore of life insurance coverage to the insured group members.
- Tata AIA Life Insurance Group Term Life Plan:
This group comes with a minimum sum assured of Rs.5000 and no maximum limit on the sum assured. Anyone from the age of 14 years to 84 years can enter this plan. It also offers the flexibility of premium payments which are eligible for tax deductions.
* Please note: Every individual and group of individuals is different and has a different set of goals and purposes. Hence the above-mentioned plans might not be the best fit for all. One should invest after researching and matching their goals.
Conclusion
A group term insurance is a great investment avenue. It is a perfect fit for organizations with employee-employer relationships. It is comparatively affordable and offers the same features and is very helpful. All companies should consider the option to buy a group term insurance plan for their employees as it offers a lot of benefits at a low cost. Although, each group is different and has a different set of people. And one should consider all the members and then choose a policy to invest in so that they can meet their goals and investment purpose and secure their future.
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What is the minimum age to enter a group term life insurance plan?
Generally, the minimum age is 18 years, but it may vary from policy to policy.
What is the maximum age to enter a group term life insurance policy?
Generally, the maximum age is 69 years at which you can enroll for the policy and 70 years for the policy’s expiration. Although, it can vary from policy to policy.
What is the tenure of this policy?
Mostly it has a one-year term, which needs to be renewed every year.
If the company offers this policy, should I buy more personally?
The answer to this depends on your needs and goals. If you feel that the insurance coverage is sufficient enough then you can opt not to invest in more policies, but if it isn’t then you are open to opting for more. Also, make sure that you have a diversified portfolio for maximum returns.