Term insurance has become a very popular financial tool for people to protect their families in case of their unexpected demise. Across the world, companies have now started implementing group term insurance policies for their employees as part of the benefits of joining the company. Group term life insurance is an excellent way to ensure the satisfaction of the employees and provide a financial safety net for their families. In this article, we’ll take a look at what group term life insurance is and its advantages.
A group term insurance is provided by employers to their employees as part of the employee benefits. Many large corporations provide free group term insurance to all their employees as well as the opportunity to customise and add riders to their plans at minimal costs. The type of coverage offered depends upon the policy of each company. Usually, employees between the ages of 18 to 60 are eligible for the group term insurance policy.
Term insurance pays out a lump sum amount of money to the family/nominee of the insured employees in case of their untimely death while the term policy is active. In a group term policy, the employer, as the policyholder, buys it for the employee (insured) and the latter’s family is the beneficiary/nominee. The employer purchases the policy for a large group of employees, hence the premiums are comparatively cheaper than individual term insurance policies.
Some employers provide fully free of cost group term insurance. On the other hand, certain companies pay a portion of the premiums and the employees pay the rest. The companies decide the death benefit based on the hierarchy of the employees and provide options for the employees to customise their term insurance plans. There are many benefits of group term insurance, both for the employers and the employees. Let’s take a look:
Here are the main advantages of group term insurance for employees:
A group term insurance plan provides financial coverage to the employees’ families and nominees. It provides a sense of relief to the employees as they know their family will have funds in case of their untimely death.
Group term insurance policies are usually paid by the employers so employees get the term insurance policy for free. Even in companies where part of the premiums are paid by the employees, the cost is very minimal as the premiums for group term insurance are cheaper.
Tax-Free Death Benefit:
As per Section 10(10D) of the Income Tax Act 1961, money received as the death benefit by the insured’s family or nominee is completely tax-free.
Employers also provide the option to their employees to add extra riders such as accidental death benefit, critical illness cover, and more, at reduced costs so that employees have all the coverages they need.
No Medical Tests:
Usually, under a group term life insurance policy, employees do not have to go through medical tests to be eligible for the term life insurance.
Group term insurance has many benefits for the employers as well:
Cheap Term Insurance:
As companies tend to buy group term insurance in bulk for their employees, the cost of premiums is significantly lower. This allows the company to provide term insurance benefits to employees at a greatly reduced cost.
Reducing Employee Attrition:
Term insurance is a major employee benefit that most employees can’t overlook. Providing group term insurance to employees ensures that they remain committed to their jobs.
The company or the employer can take advantage of tax exemptions on the premiums paid for group term insurance, under Section 37(1) of the Income Tax Act, 1961.
Boosts Performance of the Employees:
As employees do not have to worry about their family’s financial safety in the event of their unexpected death, they can focus on their work without any financial stress.
Group term insurance is a very cost-efficient way for companies and employers to provide term insurance to their employees. Employees who have been provided term insurance are motivated and committed to their jobs as they don’t have to worry about their family’s financial safety. If you are an employer who is looking to buy group term insurance for your employees, you should make sure to look at all your available options and choose a plan that gives you and the employees the best benefits.
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A group term insurance (GTI) is a form of term insurance that is provided and paid by employers for their employees.
Here are some disadvantages of group term insurance:
The employees have limited control over their group term policy.
The term insurance coverage ends once the employee leaves the company.
No, you do not get your money back at the end of term life insurance. However, if you have purchased a term insurance plan with Return of Premium rider, you will get your paid premiums back.
No, you should also look into getting your own term insurance policy for better coverage based on your needs.
Yes, you can legally buy and retain two or more life insurance policies.