Many companies today in the organised sector in India provide group term life insurance (GTL) and group health insurance coverage to their employees. Basically, GTL policies provide life insurance coverage to a group of people. Employers contribute to the entire premium and the employees can contribute for extra protection and riders.
Employers project group term life insurance as part of their benefits package to employees but it also helps employers save taxes. Employees get the assurance that they have term life insurance to take care of their family in case of their death. Unfortunately, they don’t bother much about the protection (sum assured and other benefits) they are getting and whether it’s enough for their family. Neither do they bother to buy term insurance for themselves because they think the group term insurance from their employer is enough.
There are many misconceptions about group life insurance among employees that can leave them in dire straits during times of need. To clear those misconceptions, here are 5 important things that you should know about group term life insurance. You should consider these points before deciding that you don’t need to buy term insurance on your own.
Limited insurance coverage
Many people ask this question before buying term life insurance: How much insurance coverage do I need? A good rule of thumb is to get life insurance coverage that is 10-12 times your annual income.  If you earn Rs. 12 lakh per annum, you would at least need coverage of Rs. 1.2 crore to call it adequate. Do you think your employer’s group term life insurance gives you sufficient coverage? The answer will invariably be in the negative unless you are among the top executives of the company.
Generally in India, GTL policies provide coverage in graded slabs of Rs. 5, 10 and 15 lakhs as per designation. Some companies do provide coverage according to cost to company (CTC) but generally not more than 3-5 times the annual CTC.
To provide adequate protection to your family in your absence, you should buy term insurance that has a sum assured of at least 10 times your annual income. The Bajaj Allianz term plan available on Finserv Markets is a GTL plan for your family that provides insurance coverage up to Rs. 1 crore at significantly lower premiums compared to individual term insurance plans.
Only valid for a limited term
Do you know that group term life insurance has to be renewed every year? Your employer renews the GTL policies for employees every year and if an employee leaves the job, his family has no life insurance protection during that period. If the company suffers a financial loss, it may also recall the benefit of group life insurance for its employees.
In that case, buying an individual term insurance plan becomes even more crucial. A GTL plan will not provide life insurance coverage after your retirement because as mentioned earlier, it has to be renewed yearly. On the other hand, you can buy whole life insurance that will give you coverage even after retirement. In fact with whole life coverage, you are covered until death or up to a maximum of 100 years.
Relying on GTL can be expensive
As you procrastinate buying an individual term plan; thinking that your company’s group insurance plan will be sufficient, you will be losing time and money as you grow older. Age has a significant impact on the premium costs and a difference of even 5 years can increase the premium cost by 40-50%.
If individual term insurance is too expensive for you, you can buy a Bajaj Allianz term plan from Finserv Markets, which is comparatively cheaper to any individual term life insurance and provides coverage for the entire family at a nominal cost.
Company’s GTL policies will not meet all your needs
Companies buy group life insurance in bulk and they get considerable discounts for doing so. They go with a one-size-fits-all approach which will not meet the unique needs of each individual. You never know your group life insurance may only be providing coverage for accidental death and not for death by sickness. If you look carefully, you’ll find several limitations in your employer’s group term life insurance plan.
No critical illness cover with GTL
Employer’s term insurance plans don’t come with critical illness cover and even if they provide employers with health insurance protection, the list of critical illnesses covered may be very less. In case you suffer with a critical illness while still working, you will be left to fend out for yourself.
With a Bajaj Allianz term plan you can ensure your entire family at a nominal cost and buy critical illness rider up to Rs. 10 lakh to protect yourself from diseases such as cancer, kidney failure, heart attack, etc.
We cannot overemphasise the importance of buying a pure term insurance policy for your family’s protection in your unfortunate absence. Don’t delay in buying a term life insurance plan for the sake of your family because life is unpredictable. You can’t solely rely on a group term life insurance plan to provide adequate life coverage.
Also read about other interesting retirement avenues such as ULIPs which provide high returns and tax benefits along with a life insurance cover.
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