The Buyt Desk
For Group term insurance the employer issues a master policy and pays the premium. As an employee, you should know about all the factors of this insurance type.
Group term life insurance (GTL) cover is used as a retention tool by most employers. Employers provide these policies to their group of employers for a one-year term. These are renewed every year and offer life coverage to the group of employees. The cover starts from the date of issuance of the policy. For new joiners, the coverage starts from the date of joining. The coverage differs from group to group.
What is Group Term Insurance?
Group term life insurance is a type of insurance policy which covers a group by providing each of them life insurance but under a single policy. It provides every individual in the group financial security in case an unforeseen event occurs to individuals during the coverage period.
How Does Group Term Life Insurance Work?
GTL is a single master contract scheme. Irrespective of how many people are covered under one GTL policy it has a single group administrator known as the master. The master advocates the contractual relationship between the insurance company and the policyholder (the employer). The amount of sum assured is decided by the Master and based on this the premium is paid. New members can be added at any point during the policy term. Below is the flowchart GTL plan-
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The Master is issued a master policy and is responsible for paying an initial premium.
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For a year this initial payment covers all the group members.
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The members of the group are given an option to choose the sum assured which is a lump sum amount or linked to a salary account or a loan account, etc.
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Once the premium is paid the policy commences and from this day the members are covered for a year. And can be renewed annually.
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The premium is based on the size and age allocation of the group being covered.
GTL benefits the Employees
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GTL premiums are cheaper compared to individual life insurance policies.
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For GTL individuals need not undergo a medical check-up.
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Individuals opting for GTL are automatically covered the moment they sign in.
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GTL premiums are auto-debited from the salary. So individuals will not miss paying premiums nor there is a risk of policy lapse.
Is it necessary to have a Personal Life Insurance Policy alongside a Group Policy?
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Once you retire or resign from the organization, you will no longer be covered under GTL. Having personal life insurance will help under such situations.
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The GTL cover is not customizable. Your family conditions and financial plan may need larger coverage. With personal life insurance, you can customize your coverage.
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GTL does not provide a No Claim Bonus whereas personal life insurance allows you to redeem benefits when no claim is made in a year.
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Not all GTL have options for riders while you can buy add-ons in personal life insurance.
What is the eligibility for GTL policies?
GTL is offered to the following sections of people
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Employer-employee groups
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Non-employer- employee groups
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Banks
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Professional groups
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Non-banking financial institutions
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Microfinance institutions
What are the varieties of GTL policies?
GTL can be as per the need of the group. Some plans provide uniform covers to all of their members while some provide ranked covers for various grades of members. Some provide riders and some cover outstanding car loans, housing loans etc. The master decides the coverage of the GTL policy.
Some organizations offer flat covers like Rs 3 lakh per employee while some offer graded covers like Rs 3 lakh, Rs 5 lakh and Rs 8 lakh for staff, managers and top executives, respectively. Some organizations offer cover based on employee cost to the company (CTC).
The insurer decides the premium for the sum assured based on the size of the group, group average age, occupation mix, past mortality experience and a few other factors. The premium is paid by the employer and thus the employees will not get tax benefits.
What is the Nature of GTL?
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All members of a certain group subjected to certain basic conditions of insurability are covered under GTL.
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Covers need not produce medical reports.
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GTL doesn’t offer a maturity value
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It covers death
What are the general features of GTL?
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Premium – Premium on GTL can be paid entirely by the employer and covered group members can make contributions towards the premium of the scheme.
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Double Accident benefits – On paying an extra premium, riders of double accident benefits can be added. It covers the event of an accident but the permanent disability benefit is not included.
Summing up
Life insurance coverage is the safety net that provides financial assistance to your dependents in your absence. It covers your family, safeguards their future and provides financially for your demise. If your employer covers you under Group Term Life Insurance it is a good thing but it is advisable to have an individual term life insurance along with GTL.
