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How to make the workplace a happier place with Group Term Insurance Plans

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How to make the workplace a happier place with Group Term Insurance Plans
June 16, 2023

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Term insurance has grown to be a common financial tool for people to use, to safeguard their families in the event of their untimely death. Group term insurance plans are now being offered by companies to their employees as one of the benefits of employment. It is a great approach to guarantee employee satisfaction and give financial security.

What is a Group Term Insurance Plan?

Group term life insurance is a type of life insurance in which a single policy covers a number of individuals or a group of people. The purpose of group term insurance is to provide the nominee or beneficiary with financial security in the event of death of the insured person within the policy's term.

Features of Group Term Insurance Plans

Group term insurance has various salient features like -

  • It provides multiple individuals with life insurance under a single policy.
  •  Either the entire premium is paid by the policyholder, or the employer covers the significant portion.
  • The policyholder has the option to provide coverage for their spouse and dependent children. The process of adding and deleting members from the policy is simple and effortless.
  • In the event of the covered individual's death, the sum assured is paid to the nominee.
  • Given that the life coverage is offered at lower premium rates, it is a cost-effective choice.
  • The group term life insurance plans are annually renewable.
  • All employees receive free life insurance, however the actual coverage is limited and based on variables including risk class and group size.

Benefits of Group Term Insurance Plans

Employers offer group term insurance to their employees as a perk of employment. Many large companies offer all their employees free group term insurance as well as the option to tailor and add riders to their plans at low cost. The kind of coverage provided is determined by each company's policy.

The premiums of Group Term Insurance Plans are considerably less expensive than those for individual term insurance policies because the company buys the policy on behalf of a sizable group of employees. Some employers offer group term insurance completely free of charge. On the other hand, certain companies just cover a portion of the premiums; the rest is covered by the employees. Companies choose the death benefit in accordance with employee hierarchy and give employees the choice to personalise their term insurance plans. Group term insurance has many advantages for both companies and employees.

Benefits to Employers

  • A strategy that is affordable for covering a number of individuals under one insurance at a cheap premium rate.
  • Easy procedure for removing or adding members to the policy
  • According to section 37 (1) of the IT Act, the employer's premium payment is tax deductible.
  • Having group term life insurance plans, assists in funding gratuity liability. Employers additionally receive superannuation, gratuity, and loan cover facilities in addition to the pure term plan.
  • Act as a successful retention strategy for employees.

Benefits to Employees

  • Protects the family financially in the event of the employee's untimely death.
  • No difficulties with medical testing until free coverage is exhausted.
  • For more comprehensive coverage, you can choose add-on riders like critical illness and accidental death insurance.
  • Take advantage of Section 10 (10D) of the IT Act's tax exemption benefits.*
  • Cheaper than individual life insurance, and life insurance is obtained through a straightforward paperwork process.

Who is Eligible for Group Term Insurance?

  • Employer-employee groups
  • Microfinance institutions
  • Banks and non-banking financial institutions.
  • Small medium enterprises (SMEs)
  • Non employer- employee groups
  • Professional groups
  • Start-ups

How Does a Group Term Insurance Plan Work?

Employer is the master policyholder who issues their employees with sum assured coverage under a single master policy. The amount of the sum assured is chosen by the master policyholder and employer provides a similar life cover for all the employees. However, some companies also offer life insurance based on company hierarchy levels.

Either the member's loan amount or the employee's salary is linked to the sum assured. The life insurance becomes equal to a multiple of the annual pay if it is tied to the salary. One or two times of an employee's annual pay is typically the amount of life insurance coverage. In most cases, the employer covers the entire cost of the premiums; however, there are rare instances where the company only pays the maximum amount, with the remaining amount being deducted from the employee's salary.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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*Tax benefits are subject to conditions under Sections 10(10D) and other provisions of the Income Tax Act, 1961. 

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