Group Term Insurance: A Complete Guide
Life is uncertain, and healthcare in India, 30% of the population needs more financial protection for health. People are still sceptical about opting for insurance plans because they are often expensive, and they are scared of what is hidden in the fine print.
That is why a group life term insurance plan is a good option for an employee-friendly company. Having a suitable life cover through your workplace sounds really convenient and hassle-free, and group life term insurance does bring you comfort while preparing for an unpredictable future. Here’s our guide to help you know more about the group term plans, their benefits and features, and how to claim one.
What Is Group Term Life Insurance?
Group Term Life Insurance offers coverage for a designated group of individuals over a defined period, and participants pay a set premium in exchange for the insurance benefits.
It provides life coverage to a set of people and compensates the group’s member family if they die during the policy term. The compensation amount is either paid as a lump sum or a monthly payout to the family of the deceased. Companies and businesses generally purchase these insurance plans to provide life insurance coverage to employees.When an employee dies, the plan provides financial support to the employee’s family by offering them a payout.
Group-term life insurance provides benefits to both employers and employees, including tax benefits and flexible coverage. This type of insurance offers a practical and cost-effective solution for life insurance coverage for larger groups.
Benefits Of Group Term Life Insurance
Group term life insurance provides cost-effective coverage for employees, often with lower premiums than individual policies. In the next section, we will highlight the several benefits that come with this insurance coverage:
- Cost-effective: A group plan’s premium is comparatively less than that of individual plans because it covers many individuals.
- No medical check-ups: Many group policies do not require individuals to undergo medical examinations before getting enrolled in group term life insurance plans.
- Ease of Enrollment: Group term life insurance usually involves a straightforward enrollment process, simplifying access to life insurance for employees.
- Tax benefits: Employers as well as contributors both benefit from group term life insurance. The Section 10(10D) of the Income Tax Act 1961 states that death benefits are tax-free.
- Customisable: This insurance policy can be customised by adding other options as well, such as tuition premiums, accidental death, and more.
Features Of Group Term Life Insurance
Group Term Life Insurance aims to offer a death benefit to a group of people, typically employees of a company or members of an organisation. Here are some common features of Group Term Life Insurance:
- Group Coverage: The insurance policy covers a group of individuals, such as employees of a company, members of an association, or participants in an organisation.
- Death Benefit: In the event of the death of an insured member, the policy pays a predetermined lump sum, also known as the death benefit, to a beneficiary or beneficiaries designated by the insured.
- Employer-Sponsored: Typically, group term life insurance is provided as part of an employee benefits package, and the employer often pays for a portion or the entire premium. Employees may also have the option to purchase additional coverage at a discounted rate.
- Simplified Underwriting: Group policies often have simplified underwriting processes, meaning that individuals may not be required to undergo medical exams or provide detailed health histories. It can make it easier for members of the group to qualify for coverage.
- Term Coverage: Group Term Life Insurance is usually provided for a specified term, such as one year. It may be renewable on an annual basis, and coverage may terminate when the individual leaves the group or employment.
- Convertible Policies: Some group-term life insurance policies offer the option to convert to an individual life insurance policy without the need for additional underwriting. This can be valuable for individuals who want to maintain coverage after leaving the group.
- Portability: In some cases, individuals may have the option to continue their group term life insurance coverage after leaving the group by converting to an individual policy or through a portability option provided by the insurer.
- Beneficiary Designation: Insured individuals can typically designate one or more beneficiaries who will get the death benefit in the event of their passing
Requirements For Group Term Life Insurance
To be eligible for Group Term Life Insurance, one needs to meet certain eligibility criteria. Firstly, the policyholder must be part of the group eligible for the policy. Employers often need to have a minimum number of employees to qualify for group coverage. It generally starts with a minimum of 10 people. Employers may choose to offer Group Term Life Insurance as part of their benefits package, and they may decide whether employees contribute to the premium cost or if the employer covers the entire cost.
The insurer provider sets an age limit that typically ranges between 18 and 69 years. The employer or employees can pay the premium amount depending on the policy terms. The policyholder must provide accurate information related to age and occupation as well.
Employees need to designate beneficiaries who will get the death benefit in the event of their passing. This information may be subject to updates during certain periods.
How To Claim Group Term Life Insurance?
In order to claim Group term life insurance, you need to follow the below-given steps:
- Choose The Insurance Policy
The first step is to choose the insurance policy. Check all the details of the insurance policy that you select for the employees. Understand what benefits are being offered and choose the policy of your choice.
- Premium Payments
The employer or organisation pays for the group member’s life term insurance. Generally, after a year, the employer reviews the terms of the insurance policy and may negotiate renewal terms with the insurance provider.
- Notify The Insurance Provider
Inform the insurance provider as soon as possible after the insured person’s death. The contact information for the insurance company can usually be found in the policy documents or through the employer’s benefits coordinator.
- Obtain Necessary Forms
The insurance company will provide claim forms that need to be completed. These forms typically include a death claim form and may require supporting documentation.
- Complete Claim Forms
Fill out the required claim forms accurately and provide all necessary information. It may include details about the deceased, the policyholder, and the beneficiary.
- Provide Documentation
Attach supporting documentation, such as a death certificate, to the claim forms. The death certificate is a crucial document that verifies the cause and date of death.
- Submit Claim Forms and Documents
You need to submit the completed claim forms and supporting documents to the insurance provider. It can often be done through mail, email, or an online submission portal, depending on the insurer’s procedures.
- Review and Verification:
The insurance company will have to review the claim and verify the information provided. This process may involve contacting the beneficiaries or the employer to gather additional details.
- Beneficiary Verification
The insurer will verify the identity of the designated beneficiaries to ensure they are the rightful recipients of the death benefit. It is a prescribed procedure to prevent fraud.
- Claim Approval
Upon the completion and approval of the claim, the insurance company will disburse the death benefit to the specified beneficiaries. The payment can be in the form of a lump sum or structured according to the terms of the policy.
Documents Required To Obtain Group Life Term Insurance
Here is a list of documents commonly needed during the claim settlement process:
- Completed enrollment forms provided by the employer or insurance provider.
- A list of eligible employees, often including their names, along with dates of birth, and other relevant details.
- Details about the beneficiaries designated by the employees.
- A copy of the group agreement or policy document outlining the terms and conditions of the Group Term Life Insurance coverage.
- If premiums are paid through direct debit or electronic funds transfer, employees may need to provide voided checks or bank account information.
Types Of General Life Term Insurance
Below are the different types of general life-term insurance that an employer can choose from:
- Basic Group Term Life Insurance
This type of life insurance coverage is provided as a standard benefit to employees. The premium is paid by the employer, and the amount covered is usually a multiple of the employee’s salary.
- Supplemental Group Term Life Insurance
Employees can purchase additional coverage beyond the basic group term life insurance provided by their employer. This allows individuals to customise their coverage based on their needs.
- Credit Union Group Term Life Insurance
Offered by credit unions, this type of group term life insurance provides coverage to credit union members. It may include features such as debt protection and ensuring outstanding loans are covered in case of the member’s death.
- Association Grop Term Life Insurance
This type of insurance is extended to members of professional or trade associations, this type of insurance provides coverage according to the needs of the association’s members.
- Mortgage Group Term Life Insurance:
This type of insurance covers the outstanding balance of a mortgage in case the insured individual passes away. This helps protect the family from the financial burden of repaying the mortgage.
- Union Group Term Life Insurance:
Offered to members of labour unions, this type of insurance provides coverage and financial protection to union members and their families.
- Multi-Life Group Term Life Insurance:
Often used by small businesses or professional groups, this type of insurance allows multiple individuals to be covered under a single policy. It combines elements of both individual and group life insurance.
What Is Not Covered By Group Term Life Insurance?
While this type of insurance provides valuable coverage, there are certain exclusions and limitations. The specific terms can change based on the insurance policy and provider, but common exclusions from coverage may include:
- Suicide
- Injuries caused by dangerous activities
- War or acts of terrorism
- Misrepresentation or fraud
- Participation in hazardous activities
- Pre-existing health conditions
- Policy lapse or non-payment
- Acts of god or natural disasters
- Illegal or high-risk activities
What Is Covered By Group Term Life Insurance?
Here’s what is covered under a group term life insurance:
- Death benefit
- Natural causes
- Accidental death
Well, a group life term insurance plan is a strategic move for employers looking to enhance the well-being of their employees during health emergencies. It is also a great step to foster a workplace culture that values the individuals who contribute to organisational success.
For organisations seeking a reliable partner in providing comprehensive group health insurance, iCare stands out as a trusted service provider. iCare is committed to simplifying the complexities associated with health insurance, making it accessible and beneficial for both employers and employees.
FAQs:
1. If I have an existing term insurance plan, can I still be eligible to be a part of a group term insurance plan?
You can have two term insurance plans if you meet all applicable inclusion and exclusion criteria for both policies.
2. What is group life term insurance?
It is a type of life insurance that provides life coverage to a group of people, such as employees of a company or members of an organisation, in case of the death of the covered individual during the policy term.
3. Why should you invest in Group Term Life Insurance?
Group term insurance is more cost-effective than individual life insurance policies. Here, the risk is spread among people, and you can also avail of tax benefits. It can provide financial protection to employees and their families in the event of an unexpected tragedy.
4. What is the claim settlement process?
The first step in the group term insurance claim settlement process is registering the claim with the insurance company (notification of death), followed by submission of required documents, claim processing, decision, settlement and closure of the claim.
