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What is a Group Term Life Insurance Policy?

Group term life insurance policy covers a group of people under a single or master policy contract.

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Group term life insurance policy covers a group of people under a single or master policy contract. The policy owner, in this case, is an employer providing an insurance cover to a fixed number of employees.

There are varieties of group term life insurance policy. It can cover an entity like labour organisation, professional groups, NBFCs, consumer groups, non-employer-employee groups, etc. It can even cover a self-initiated group with a vested interest like to provide insurance coverage to a group of credit card holders, housing loan members, etc., against the death of an individual member in the group. Further, the group term life insurance policy can also consist of members belonging to a social organisation or the same occupation.

In most cases, the group term life insurance policy will provide a uniform coverage to all the group members.

However, depending upon the exam terms and conditions of the policy, its members can also be ranked in order of coverage provided. For example, if there are 10 members of a group term life insurance policy, then, the total coverage provided can be according to the rank of each group member, or members can be ranked for the purpose of final sum insured. If an A employee is earning 10 lakhs per annum and a B employee is earning 7 lakhs per annum, they can be a part of the same group term life insurance policy, but depending upon the employer choice the sum insured for A can be greater than B.

To be eligible for the employer initiated group term life insurance policy, an employee needs to be an active participant in the organisation. Only full-time employees are considered for the group term life insurance policy. There are further conditions like an employee cannot be more than 70 years of age or less than 18 years old.

Also, if an employee leaves the company, he is no longer an identified member of the group term life insurance policy. An individual has an option to then convert it into an individual policy but at a high premium cost to be paid individually.

In most cases, the group policy is offered as a complete employee benefit package. An employee must ideally accept to be a part of the group term life insurance since it is very affordable and cheaper than buying an individual policy. The sum insured is equivalent or double your annual salary. An employee has the option to choose a nominee or the beneficiary. It can be considered as a supplement coverage too.

The non-employer-employee group term life insurance policy is subject to the rules of IRDA. The basic condition to procure and secure the policy benefits is that the group formed should not be just deliberated to buy insurance. That, the purpose of buying insurance should be incidental.

The employer has the master contract of the group term life insurance policy and the employee receives a certificate of proof. Similarly, in case of a pool-in member group insurance, the entity keeps the master copy of the group term life insurance policy and the participating members have a certificate of proof.

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