What Are Group Term Insurance Policies?
Updated On Sep 30, 2021
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For people with financial responsibilities, life insurance is a necessity. If you are a working employee, you can use your employer's group term insurance plan to protect your loved ones' future by receiving a death benefit if something happens to you. Continue reading to learn more about a group term life insurance plan's qualifying requirements, features, and benefits.
What are Group Term Life Insurance Plans?
The insurance coverage offered to a group of people is referred to as a group term life insurance policy. In the event of an employee's death, a group term life insurance policy provides financial independence to the employee's family. Its purpose is to offer a monetary guarantee to the beneficiary of a group term life insurance policyholder in the event of the insured's death. Group term life insurance plans supplied by employers have become an essential part of employee benefit packages. In reality, most fraternal organisations offer their members group term life insurance.
Who Can Opt For a Group Term Life Insurance Plan?
The following groups of people are eligible for group term life insurance policies:
- Employer-employee groups
- Non employer-employee groups
- Professional groups
- Non-banking financial institutions
- Microfinance institutions
Group term life insurance policies come in a wide range of options. Here are a few examples.
- Some plans may provide all of its members with uniform covers.
- Some plans provide ranked covers for different membership levels.
- Some plans cover outstanding mortgages, vehicle loans, and other debts.
- Riders, such as critical illness benefits, accident benefits, disability benefits, and so on, are included in some plans.
How Does Group Term Life Insurance Policies Work?
A master policy is issued to a group administrator, for which he pays the first premium. This initial contribution covers all of the group's members for one year. Members of the group have the option of selecting the sum assured. This cash can be a one-time payment or connected to a salary or loan account, for example. After the policyholder pays the premium, the members are protected from the policy's start date for a year. The group life insurance plans are renewable on an annual basis. The premium is determined by changes in the size and age distribution of the target age group.
What are the Advantages of A Group Term Life Insurance Plan?
The advantages of a group term insurance plan for employees and employers are listed below.
- Employers - Group term life insurance products make it simple for employers to cover their gratuity liability. Gratuity funds are carefully constructed to cover future gratuity payments, alleviating the load on the employer. In India, group term life insurance policies are more affordable because managing schemes on a group basis is less expensive. Returns on the funds are received based on the performance of the client-selected funds. Funds that perform better will earn higher returns, which will reduce the employer's costs. Some policies provide both life insurance and gratuity benefits for employers.
- Employees - Employees are guaranteed financial support for their families in the event of their death, serious sickness, or other unforeseen circumstances. Employees can enjoy the ease of not having to undergo medical examinations until their free coverage runs out. Employees can take advantage of Section 10 (10D) death benefits, which are tax-free. Simple documentation allows for easy administration. These plans can be tailored to fit the specific demands of the policyholder. All in all, it provides security to the insured's family and protects the financial interests of the insured.
A group insurance policy, without a doubt, is a better approach to obtain insurance protection against a variety of risk factors, let alone life. A group plan's premium is substantially lower than individual policies because it covers many people. Hence, it would be best if you began by determining the best group plan offered by your employer.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.