Group Term Life Insurance: Everything You Need to Know

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You may have heard of group-term life insurance if you are a company employee or an organisation member. It is a single contract for a group of people and provides the same benefit to the members insured. If you are wondering how it works and the benefits it offers, this article will explain the concept and elucidate the claim process to help you have a better understanding of this important insurance product.

What is Group Term Life Insurance and How Does it Work?

Group-term life insurance is a type of life insurance that covers a group of people under a single policy. The group can be formed by an employer, an association, a society, a bank, or any other entity with a common bond or interest. The insurance policy provides a lump sum amount (called the sum assured) to the nominee or beneficiary of the group member in case of his or her death during the policy term.

This policy is usually for a fixed period, such as one year, and can be renewed annually. The group leader or the master policyholder finances the group term life insurance policy premium on behalf of the group members, who are the insured persons. The premium amount depends on various factors, such as the size of the group, the age and gender of the group members, the occupation and health status of the group members, the sum assured, and the policy term.

The Benefits of Group Term Life Insurance

Group-term life insurance offers several benefits for both employers and employees. Some benefits are:

For employers:

  • This can help employers attract and retain competent employees, as such protection can be a valuable employee benefit, which can reduce the turnover ratio and minimise subsequent expenses.
  • It enhances the morale and loyalty of the employees by showing them that the employer cares for their well-being and their families, and can boost efficiency levels as well.
  • It reduces the administrative and operational costs of managing individual employee life insurance policies.
  • It provides tax benefits to the employer as the premium paid for the group term life insurance policy is deductible as a business expense under Section 37(1).

For employees:

  • A group term life insurance provides financial security and peace of mind to the employees and their families in case of any unfortunate event. Employees should use a term insurance premium calculator to check if the coverage is sufficient.
  • It covers the employees without any medical examination or underwriting, as the risk is spread over a large group of people.
  • It offers a low and affordable premium rate as compared to individual life insurance policies, as the group leader can negotiate a better deal with the insurer.
  • It provides tax benefits to the employees as the premium paid by the employer for the group term life insurance policy is not considered a perquisite in the hands of the employees under Section 17(2).

Claim Settlement Process and Tax Benefits of Group Term Life Insurance

In case of the death of a group member during the policy term, the nominee or beneficiary of the group member has to file a claim with the insurer to receive the sum assured. Here are the steps involved:

  • The nominee or beneficiary of the group member has to inform the group leader and the insurer about the death of the group member as soon as possible, along with the death certificate and the group member’s certificate of insurance.
  • The nominee or beneficiary of the group member has to fill and submit a claim form to the insurer, along with the required documents, such as the death certificate, the certificate of insurance, the identity proof, the bank details, etc.
  • The insurer will verify the claim and the documents. If everything is in order, the insurer will approve the claim and transfer the sum assured to the nominee or beneficiary of the group member within a stipulated time frame. This may vary based on the insurer and the policy terms.

Conclusion

To sum up, a group term life insurance covers the insurance of a group of people under a single contract. It provides financial security and peace of mind to the group members and their families in case of any unfortunate event, while ensuring lower expense for the employer as well. It also offers several benefits to the group leader and members, such as low and affordable premiums, easy and quick claim settlement, and tax benefits. Group term life insurance is available in different types, such as uniform coverage, loan cover, special advantages, and rider options, and the group leader and the group members should carefully compare and choose the best one for their needs.

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