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Group term insurance is the plan that you can take to secure your loved one’s future as it provides financial assistance to your partner in your absence. Being a salaried individual, you will benefit from receiving this complimentary plan with your compensation package. In general, your organization will provide you with this scheme. As your company offers this plan, the firm pays the entire premium. In this type of policy, the insurance company is responsible for paying your policy's benefits to your family in the unfortunate event of your death. Additionally, if you wish to add extra coverages to your term life insurance plan, you will have to buy it on your own.

Who Can Obtain a Group Term Life Insurance?

Here are the details about the groups of people that can get group life insurance.

 

  • Employer-employee associations

  • Employee-non-employer communities

  • Financial institutions

  • Professional organizations

  • Non-banking business

  • Microlending firms

Advantages of GTLI

Following are the several benefits of group term life insurance:

 

  • You will get peace of mind as it will be guaranteed that financial assistance will be provided to your family in the unfortunate circumstance of your death.

  • You will reap the benefit of receiving yearly medical tests for free.

  • You are not required to worry about paying the policy's premiums as your firm will cover it.

  • The premium value of GTLI is lower compared to individual policies.

  • According to Section 10 (10D) of the Income Tax Act of 1961, insurance payments made to legal beneficiaries after the policyholder's unfortunate death are exempted from taxation.

Even though this scheme comes with multiple benefits, you must be aware of certain group term life insurance limitations.

Let us have a look at those points.

Disadvantages of Group Term Life Insurance in India

Below are the points explaining the disadvantages of group term life insurance.

Coverage for the Restricted Amount

Professionals recommend that you always choose policies that are at least ten times larger than your annual income. However, most GTLI plans deliver coverage only 3 to 5 times larger than the annual income.

 

Depending Upon Your Employment

As previously stated, your corporation will provide you with the GTLI; however, if you leave the company, your policy will lapse, and you will no longer be eligible for any benefits. Moreover, it will not deliver any coverage after your retirement. Therefore, it is advised that along with the GTLI, you should also get an individual policy because this plan allows you to buy it for up to 100 years.

 

May not Meet all Your Prerequisites

It is possible that the company's group term life insurance plan may not meet all your needs. Hence, having an individual plan will be the best alternative to eliminate any risk.

 

Doesn’t Cover Any Major Illness

GTLI plan does not come with critical illness coverage. As a result, if you are diagnosed with a critical illness, you will have to pay on your own for the treatment. This can increase your financial burden. So, purchasing an individual term insurance policy is crucial because it covers major illnesses.

 

Can’t be Customised

You cannot tailor group term insurance as per your or your family's specific needs. On the other hand, individual term insurance allows you to customise your plan to meet your specific needs.

Concluding Comments

Getting term insurance will act as a safety net to protect your family financially. As a result, skipping it is not a good idea. Having a GTLI may not be sufficient; therefore, it is recommended that you should also get an individual plan to provide extra financial safety to your family. 

FAQs

  • ✔️What are the minimum and maximum ages required to get group term insurance?

    You must be a minimum of 18 years to qualify for group term insurance—however, the maximum age for the same ranges between 65 to 69 years.

  • ✔️What is the timeframe of the group term life insurance plan?

    Generally, the insurance policy is for one year. Following that, the policy must be renewed annually.

  • ✔️Can I convert my GTLI to an individual policy?

    A few organisations offer the option of transforming the group term life insurance policy to an individual plan while changing jobs. However, this alternative comes with extra costs and higher premiums.

  • ✔️Is there any tax benefit available with GTLI?

    Yes, according to section 10 (10D) of the Income Tax Act of 1961, insurance payments made to legal beneficiaries after the policyholder's unfortunate death are exempted from taxation. 

  • ✔️Do I need to pay the premiums for the policy?

    No, you are not required to pay any amount. However, as a salaried person, you will have the advantage of receiving the complimentary group term insurance plan as part of your compensation package through your organisation. 

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