All You Need to Know About Group Term Life Insurance

Group Term Insurance plans are becoming increasingly popular by the day. In a short time, these plans have become a way for employers to provide financial security to their employees and their loved ones. Group Term Insurance means a policy that covers a group of people under one collective policy. Through these kinds of plans, the family of covered employees receives economic stability in dire times.

In other words, under a Group Term Insurance plan, the beneficiaries of the insured employees get death benefits in case of their unforeseen death. It goes without saying that the loss of a bread-earner in any family plays havoc with the household. In such times, the grieving family members require financial support and independence to push through their difficult times. While a Group Term Insurance policy is designed to cover groups of people, it is not simply for employer-employee groups.

These plans are also found in other structural groups like microfinance institutes, NGOs, customers of banks, professional groups, etc., and they come with diverse benefits. These benefits range from uniform covers for all to ranked covers for various grades of members.

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How Does a Group Term Plan Work?

The Group Term Insurance follows a systematic flowchart with regards to its functioning. It is managed by a group administrator who is issued a master policy, for which they pay an initial amount. All the members of the group are covered through this initial amount for a tenure of one year. Members of the group get to choose the sum assured that may be a lump sum or could be linked to a salary or loan account, etc.

Most Group Life Insurance plans are renewed annually. The charged premium depends on two parameters- modifications in the size and age allocation of the respective age group. Some group insurance schemes also give cover for outstanding loans to borrowers, while others provide critical illness and disability benefits.

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How Does Group Term Insurance Benefits Employees?

The group term insurance plan comes with a string of benefits for employees. Besides financial support in the unfortunate event of their death, family members get other benefits too. For example, no medical checkups are required at the time of filing a claim. There's also hassle-free administration in terms of documentation. Moreover, employees get to enjoy death benefits that are exempted from tax under Section 10(10D) of the Income Tax Act. Lastly, premiums paid by employers are not treated as profits in the policy.

How Does Group Term Insurance Benefit Employers?

Group Term Insurance policies have double-edged benefits as they are advantageous for both employer and employee. It helps employers in funding their gratuity liability smoothly under group term insurance policies. Since gratuity funds are strategically intended to meet consequent gratuity payments, the burden on the employer gets dwindled. In India, Group Term Insurance policies prove to be more economical as managing schemes on a group basis is more cost-effective. Some plans offer both life insurance covers and gratuity benefits to employers.

So if you are looking for a conducive insurance policy that covers a group of people and offers tax benefits simultaneously, a Group Term Life Insurance is a must for you. Be sure to check out the vivid options provided by various insurers in the market and save time, money and effort.

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