Who is Eligible for Group Term Insurance Policy?
Group Term Insurance
Group Term insurance refers to the type of life coverage offered to a group of people under a single policy. In general the group term insurance is offered to any group of people except for those who form a group with a sole purpose to avail term insurance. The group term insurance is taken by an employer to cover the life of his/her employees working in the organization. It is an industry practice to purchase group term insurance in addition to the group health insurance by the organizations. The group term insurance is given as a part of the employee benefits to the employees working in an organization.
Group Term insurance provides financial security to the beneficiaries of the insured employees in an unfortunate event resulting in the loss of life of the employee. Employers are obliged to take group term insurance policy so that they can provide a sort of financial assistance to the beneficiaries of the employees in the event of death of the employee during or after working hours.
Who is Eligible to take Group Term Insurance policy?
Group term insurance policy can be offered to the below section of people who are eligible to take them:-
- Employer- Employee groups are eligible to take Group term insurance policies where the employer would pay the premium to the insurance company in return for the group term insurance policy which covers the employees of the organization.
- Non employer-employee groups such as members of a society, apartment or a bank are also eligible to take the group term insurance policy where there would be no employer-employee relation in the policy.
- Banks are eligible to take group term insurance policies which in turn offer their customers having relationships with the bank. Normally in this type of group term insurance all the customers would be covered for the same sum assured by the bank.
- The minimum entry age of the members to be eligible for group term insurance would be 18 years whereas the maximum entry age would normally range between 65-70 years.
- The salary eligibility to take a group term insurance would be more or less 10 times the yearly salary of the employee. This coverage varies among the employees as there would be different salary grades for the employees working in an organization. Each employee would be given the group life insurance cover as per the salary drawn by that employee during that particular financial year.
- Non banking financial institutions and micro finance institutions are eligible to take the group term insurance policies for their customers.
- Associations and their members are eligible to take the group term insurance plan which are offered by the life insurance companies in India.
- Trade unions and their members are eligible to take the group term insurance plans after paying the required premium.
Factors that determine the eligibility to take Group term life insurance:
There are certain factors which decide the eligibility to take group term life insurance policy which are mentioned below:-
- Salary of the employee: The basic eligibility to take a group term insurance policy is the salary of the employee. There are different grades and salary structures in an organization and the group term insurance coverage is offered as per the salary of the employee. In general the group term insurance coverage would be 5-10 times the annual salary of the employee. Higher salary employees would be covered for higher sum assured while lower salary employees would be covered for lower sum assured.
- Nature of work of the employee: The nature of work of the employee in an organization is also a factor that determines the eligibility to take group term insurance. For instance, some insurance companies wouldn’t offer group term insurance to companies involved in hazardous activities such as Petroleum extraction, mining, adventurous sports etc. The nature of work of the organization also determines the eligibility to take a group term insurance policy.
- Type of employment: The employment can be “On-roll” or “Off-roll” which forms the eligibility to take group term insurance policy. Most of the organizations take group term insurance policies to cover their on-roll employees only and also the insurance companies prefer to cover the on-roll employees of any organization.
- Experience in the current role/company: The experience in the current organization also decides the eligibility to take the group term insurance policy. Most of the organizations do not offer group term insurance coverage to the freshers and trainees. The experience in an organization also forms a part of the eligibility requirement for group term insurance policy.
Features of Group Term insurance:
- Additions/Deletions: The most favorable feature of the group term insurance policy is that the additions and deletions of the members of the group term insurance policy can be done throughout the policy period. The insurance company should be notified of addition or deletion of the members within 45 days of joining or leaving the organization. Any new members joined in the organization can be included in the group term insurance for the rest of the policy period and any member who left the organization can be deleted from the group term insurance policy. The premium would be refunded or collected whenever there would be an addition or deletion in the group term insurance policy.
- Standard premium rates: The premium rates are standard throughout the policy period for group term insurance policies. Per member premium rate would not change for a particular age group despite the claim ratio in the group term insurance policy which is an advantage to the organization. The premium rates are standardized for the organization in group term insurance policy.
- No medical checkup required: The best feature of group term insurance policy is that it would not require medical tests to be conducted for any age group of members before issuing the policy. It means that any member of the organization can join the group term insurance policy without undergoing any medical tests which would otherwise be mandatory for individual term insurance policies. In group term insurance policy, there is no requirement for medical underwriting irrespective of the age and coverage opted by the member.
- Affordable rates: The rates offered by the insurance companies in group term insurance policies are quite affordable. Most of the group term insurance policies come at affordable and discounted rates to the organizations. If the claim ratio is less in the previous year then the insurance companies would provide a higher discount on the premium to be paid for group term insurance policies.
- Pre-existing diseases covered: The other best feature of group term insurance policies is that the pre existing diseases are covered automatically from day 1 without any medical tests. The pre-existing diseases are covered in the group term insurance policies thereby increasing the chance of claims for the members of the group term insurance policy. Any disease or illness which exists prior to taking the group term insurance policy is termed as the pre-existing illness or disease. In individual term insurance policies, there would be a waiting period before the pre-existing diseases are covered under the policy.
- Each year renewal: The group term insurance policies are renewed each year and there would be no obligation on the part of the customer or the member to continue the group term insurance policy with the same insurance company. If the customer is not satisfied with the service provided by the insurance company, then there would be an option to change the insurer at the time of renewal unlike the individual term insurance policy where there would be no option to port the life insurance policy from one insurance company to the other without losing out the benefits.
- Changes in Sum assured: Group term insurance policy permits the customer to make changes in the sum assured at the time of renewal. The insured can make changes in the sum assured such as increase or decrease the grades of sum assured at the time of renewal of the group term insurance policy. This option can be exercised by the customer without undergoing any medical underwriting.
Advantages of Group Term Insurance:
- Term insurance to every employee: Group term insurance policy covers almost all the employees of an organization who are eligible as per the terms and conditions laid down by the organization. In this way any employee who does not have an individual term insurance policy can be provided life insurance cover with a group term insurance policy. Term insurance coverage would be available to the employees as long as they are on the payroll of the organization.
- Tax benefits: Group term insurance policies provide certain tax benefits to the employers. The premium paid towards the group term insurance policy is exempted under the relevant sections of Income tax act. The tax benefits can be claimed only by the employer who pays the insurance premium for group term insurance policy.
- No medical checkups: Unlike individual term insurance plans, group term insurance policies do not require any medical checkups for issuing the policy. All the members of the organization can be covered under the group term insurance policy without undergoing any medical checkups. This is the biggest advantage of group term insurance policy as there would be no medical underwriting required and employees with medical history can avail group term insurance policy.
- Customizable: Group term insurance policies are customizable as per the requirements of the customers. Riders or add-ons can be added to the base policy with ease and the customization can be done as per the needs, requirements and affordability of the employer.
- No waiting period: Group term insurance policies have no waiting period to make the claims. The members of the group term insurance policy can claim immediately after availing the cover without the need to wait for a certain period of time as is the case for individual term insurance policies.
- Hassle free claim settlement: Group term insurance policies provide hassle free claim settlement to the beneficiary of the employees. The beneficiary of the employee can get support from the organization in processing the claim hassle free in consultation with the insurance company. The claim would be hassle free as the employer would contain the employment details of the expired member.