Insurance is an integral part of an individual’s life. Many companies and their employees take insurance as an essential constituent of their employee benefits package in India. Considering the increase in medical treatment and uncertainties of life, nowadays, employers are considering offering group term insurance as benefits to their employees. Many employees prefer to be associated with an organisation that puts efforts towards the welfare of employees by providing them group insurance as a benefit.
Essentially, a group term policy is a term insurance contract issued to the employer who provides it to their employees. This type of insurance policy allows the employee to avail life insurance cover benefits and ensure the financial security of their loved ones while being employed at the organisation. Let’s look at the benefits of group-term policy!
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What is a group term insurance policy?
- A group term policy is a type of life insurance cover provided to the members of an organisation or the employees.
- It is essentially a contract of life insurance coverage issued to the employers, who then provide it to their employees at no cost as part of employees’ benefit. Under a group insurance policy, the employer is the master contract.
- A group term plan ensures that employees’ loved ones are safe and secure, as a death benefit is provided to the employee’s family in case of an untimely demise of the employee during the policy tenure.
How does a group term life insurance work?
Here is a flowchart that depicts how a group term plan works:
- The employer is issued a master contract, wherein they make the initial premium payment.
- The initial premium payments cover the organisation’s employee for one year with an option to renew the policy annually.
- The employer also offers to include the employee’s financial dependents under the same policy.
- The employee also has the option to enhance the coverage by adding riders to the policy, which may increase the premium.
- In case of an untimely demise of the employee during the policy tenure and while being enrolled in an organisation, a death benefit will be provided to the employee’s family.
Benefits of group-term plan for employers
A Group term plan is as beneficial to the employers as it is to employees. Below-mentioned are some benefits of a group term plan for employers:
- Affordable Insurance Cover: Employers are likely to purchase group term plans on a wholesale basis to provide affordable access to their employees. This way, they can secure a good insurance cover for every employee and allow the employer to offer life insurance coverage to the organisation’s members and employees.
- Reduced Employee Attrition: Group term policy is one benefit that most employees don’t overlook. Employees prefer an employer who provides insurance benefits as a part of the employee benefits package. This way, the employer will be able to ensure the employer’s loyalty to an organisation which also increases the employee’s morale.
- Tax Deductions: One significant benefit of group term insurance for employers is that they can avail tax deductions for premiums paid towards a group term policy under Section 37(1) of the Income Tax Act,1961.
Benefits of a group-term plan for employees
Here are some benefits of group-term policy that an employee can avail:
- Default Life Cover: A group term policy provides life insurance cover to employees by simply being a part of the organisation. If the employee does not have an individual term insurance policy, he/she will be to avail the benefits of life insurance cover from the group insurance policy. The employee will also be able to ensure their family’s financial security in case anything unforeseen happens to them.
- Tax Exemptions: An employee can avail tax benefits if the employer has offered a contributory group term life insurance policy. Under contributory group term life insurance policy, the premium payment is shared between the employee and employer. The employee will be able to avail tax exemption for the premiums paid towards a group term life insurance policy as per Section 80C of the Income Tax Act, 1961.
- Customisable as per Employee’s Requirement: Employees can also add riders to the group term life insurance policy to enhance the coverage. They can also add their financial dependents such as children, spouse, or parents under the same insurance policy.
- Cost-Effective: Group term life insurance is inexpensive compared to individual retail term insurance policy. Employees can also include their family members under the same policy at an affordable cost.
- Provides a Sense of Security: A group term policy provides a sense of security to the employee. This way, the employer will be able to encourage the employee to stay loyal to the organisation.
As a working employee, you can avail group term insurance policy from your employer. Undoubtedly, a group insurance policy is a great way to provide a sense of security to your employees. This will only increase the morale of the employees and help you reduce the attrition rate. A group term life insurance policy is as beneficial for employers as it is for the employees.