How Do Group Term Insurance Plans Work?

If you are an employee with a company or an organisation, or know someone who is, you may have heard about the employer offering a life cover to their employees. Here, every employee is covered with the same type of policy, probably being offered the same sum assured. It is quite common for these group life covers to be term life insurance plans.

How do these plans function? Is having a group term life insurance plan enough? How much coverage do you get under it? Can you get an add-on cover? Before we understand the nuances of group term plans, let’s understand what term insurance is.

Basics of Term Insurance

Term life insurance is the type of life insurance that is preferred by those who seek a simple and relatively affordable life cover. There are several types of life insurance in the market. Of these, term life plans are the ones known to be low-cost.

Furthermore, they also offer a shorter term duration (as low as 10 years). This allows the policyholder to buy these plans when they seek something affordable, and later, change it to a plan type that matches their new income levels.

How do term life insurance plans work? There are various sub-types within term insurance, so it is ideal to start by browsing for the plan that suits you right. Once you have shortlisted a couple of these plans, you can use their online premium calculators to get a better idea of the premiums you would have to pay based on your age, gender, occupation, and other details, and the sum assured you require.

With an estimate of the premiums that you would have to pay, you can select one plan out of the several ones available to buy. Once you buy the plan and start paying regular premiums (or pay a single premium), you are covered by the plan.

In the face of an unforeseen circumstance, the term life insurance plan allows you to offer financial security to your loved ones. This is ensured by the nomination process in the policy. To sum it up, term insurance is a way to protect your loved ones and enable them, financially, to face any emergencies.

So, what is group term life insurance? And how is it different from regular term plans?

Group Term Insurance Plans

When a person or an organisation buys a term life plan to cover a group of people associated with them, it is referred to as group term life insurance. These plans are commonly purchased by entities that have a group of people associated with them. For example, a company could buy group term insurance for their employees, or an organisation may buy it for their permanent members.

Thus, it is a single policy covering multiple people. In the event of a mishap with any member covered under this policy, the insurance provider will pay their nominees a benefit either as a lump sum or as a monthly income. It allows the entity purchasing the policy to enable its members or employees to offer security to their loved ones. On the other hand, it could be viewed as a perk of being associated with the organisation or the employer.

In the case of group term life policies, the primary policy documents come in the form of a master policy that lies with the group administrator within the organisation. When offered life cover by your employer, it is usually a part of your overall compensation package. These covers are usually of a temporary duration (one year) and will need to be renewed for you by your organisation when due. However, the cover may be valid for you only for as long as you are formally associated with the organisation.

Do You Need a Personal Term Life Cover?

Know that even when you are covered with a group term life insurance plan, it is possible for you to get a personal term life coverage. If the person insured feels that the coverage offered by the group policy is not sufficient for their family, or they may have recently taken a loan and want additional security for it, they may opt for a personal term insurance policy.

Another pro of opting for a personal life cover is that you can decide on the duration of the coverage. Since group term life insurance plans only offer coverage for either as long as the entity decides to offer the coverage, or as long as you are a part of the organisation. Thus, having a personal term life insurance plan allows you to rest assured that you are covered, irrespective of your association with the group.

Group term plans not only act as a perk for the members or employees but are also a way to ensure the security of their respective families, without having to pay a significant premium amount for the same. The premiums also tend to be lower when plans are bought for a group, thus making these plans more accessible.


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