6 most common group term life insurance myths

What is group term life insurance?

Group term life insurance (GTLI) is a life insurance policy employers offer to employees as part of their benefits package. It provides a lump-sum payout to the nominee if the employee passes away during the policy term. It’s affordable and valuable, but it comes with limitations, especially when compared to a personal term plan.

To learn more about GTLI, click here.

Common myths about group term life insurance

Myth 1: “Group term life insurance covers all causes of death.”

Not entirely true. While GTLI covers most natural and accidental deaths, some exclusions still apply. These often include:

• Suicides within the first policy year
• Death due to participation in hazardous activities
• Death caused during criminal acts

Myth 2: “Group term life insurance is only useful for death benefits.”

GTLI primarily offers death coverage, but many organizations add optional riders such as:

• Accidental death benefit
• Disability benefit
• Critical illness rider (rare, but possible)

Myth 3: “Young and healthy people do not need group term life insurance.”

This misconception is extremely common. HRs often notice younger teams opting out or ignoring life insurance benefits. But age and health don’t eliminate risk. Life is unpredictable, and GTLI ensures:

• Immediate protection from day one of employment.
• Coverage without medical tests (a huge advantage for early-career employees).

Myth 4: “Group term life insurance is enough; I don’t need a personal policy.”

Relying only on GTLI is risky. Here’s why:

• Coverage ends when an employee leaves the organization.
• Sum assured is usually fixed and low (₹3–10 lakh in most SMEs).
• Not portable, employees cannot carry it after resignation.
• No customization or riders in most corporate plans.

Best practice: Combine GTLI with a personal term plan for long-term, uninterrupted coverage.

Myth 5: “Claims always get delayed in group insurance.”

This was true years ago, not anymore. Insurers and TPAs now use digital systems that handle:

• Online claim submission
• Automated document checks
• Faster communication with HR teams

Platforms like Pazcare make this even smoother by helping HRs track claims, upload documents, and resolve queries faster. Delays typically occur only when documents are incorrect or incomplete.

Myth 6: “You don’t need to update nominee details.”

This is one of the biggest causes of claim disputes. Employees often forget to update nominees after marriage, childbirth, or major life changes. Outdated details can:

• Delay payouts
• Create legal complications
• Cause disputes between family members

How HRs benefit from reinforcing nominee updates:

• Fewer claim escalations
• Lower administrative burden
• Higher employee trust and satisfaction
• Better financial security for employee families

Conclusion

Understanding the facts about group term life insurance helps employees make better financial decisions and ensures organizations offer meaningful protection. HR teams play a crucial role in educating employees, clarifying misconceptions, and encouraging regular policy reviews, including updating nominee details.

At Pazcare, we help companies design transparent, high-value group term life policies that truly support their teams. Want to offer better protection to your employees? Book a call with us today.