A group term insurance is provided by employers to their employees as part of the employee benefits. Many large corporations provide free group term insurance to all their employees as well as the opportunity to customise and add riders to their plans at minimal costs. The type of coverage offered depends upon the policy of each company. Usually, employees between the ages of 18 to 60 are eligible for the group term insurance policy.
Term insurance pays out a lump sum amount of money to the family/nominee of the insured employees in case of their untimely death while the term policy is active. In a group term policy, the employer, as the policyholder, buys it for the employee (insured) and the latter’s family is the beneficiary/nominee. The employer purchases the policy for a large group of employees, hence the premiums are comparatively cheaper than individual term insurance policies.
Here are the main advantages of group term insurance for employees:
Financial Coverage:
A group term insurance plan provides financial coverage to the employees’ families and nominees. It provides a sense of relief to the employees as they know their family will have funds in case of their untimely death.
Free/Cheap Premiums:
Group term insurance policies are usually paid by the employers so employees get the term insurance policy for free. Even in companies where part of the premiums are paid by the employees, the cost is very minimal as the premiums for group term insurance are cheaper.
Tax-Free Death Benefit:
As per Section 10(10D) of the Income Tax Act 1961, money received as the death benefit by the insured’s family or nominee is completely tax-free.
Additional Riders:
Employers also provide the option to their employees to add extra riders such as accidental death benefit, critical illness cover, and more, at reduced costs so that employees have all the coverages they need.
No Medical Tests:
Usually, under a group term life insurance policy, employees do not have to go through medical tests to be eligible for the term life insurance.
Group term insurance has many benefits for the employers as well:
Cheap Term Insurance:
As companies tend to buy group term insurance in bulk for their employees, the cost of premiums is significantly lower. This allows the company to provide term insurance benefits to employees at a greatly reduced cost.
Reducing Employee Attrition:
Term insurance is a major employee benefit that most employees can’t overlook. Providing group term insurance to employees ensures that they remain committed to their jobs.
Tax Benefits:
The company or the employer can take advantage of tax exemptions on the premiums paid for group term insurance, under Section 37(1) of the Income Tax Act, 1961.
Boosts Performance of the Employees:
As employees do not have to worry about their family’s financial safety in the event of their unexpected death, they can focus on their work without any financial stress.
