How Does Group Term Life Insurance Work?

Table of Content:

• What is Group Term Life Insurance?
• How can Group Term Life Cover Increased?
• How does Group Term Life Insurance Work
• Benefits
• Limitations
• Group Term Life Insurance Premiums Explained
• How to Purchase Group Term Life Insurance

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Employees are the assets of any organization. Any mishap happening to the employee can negatively impact his/her family and the organization. Being a responsible employer, purchasing a group term life insurance policy can ensure the financial security of the affected family. As the saying goes, A little kindness goes a long way!

But, let's look at what is Group Term Life Insurance?

What does group term life insurance cover?

Group Term Life Insurance (GTLI) covers a group of people in exchange of a fixed premium rate. A group term life insurance is a blanket cover, purchased by the employer for the employees. This secures the employees and their families with a death benefit. This means, during the employee’s death, the family/the nominee is paid with the sum assured amount.

Now can the coverage of a group term life cover be increased?

Of course yes, with the help of group term life insurance riders, the scope of coverage can be increased. This means not only death benefits but other benefits can be added to the existing policy.

A critical illness rider to the existing group term insurance can offer a lump-sum assured in case the employee is diagnosed with a critical illness mentioned in the policy document. 

A terminal illness rider covers the employee for terminal illness. This will be settled even before the death of the employee. A doctor declaration is mandatory for claiming this rider.

These riders offer extensive coverage to the base group term life insurance policy purchased by the employer. However, please note that the sum-assured settlement always happens as per the terms and conditions of your policy.

Read: Group term insurance benefits

How does Group Term Life Insurance Works?

When the employer purchases the policy, they become the policyholder and employees become the beneficiaries. If an uncertain death happens during the employment, the policy terms trigger and the family of the deceased receive a death benefit.

What are the benefits of group term life insurance?

• Group term life insurance gives employees an assurance that their employers care about the well-being, and are protecting their families as well during difficult times. This is a good way to build trust in your employees.
• Group Term Life is cheaper than individual policies.
• Group Term Life Insurance coverage is guaranteed accepted. It is very rare that someone is rejected for the coverage.

What are limitations of Group Term Life Insurance?

There are some disadvantages to Group Term Life Insurance.

• Limited customization: Since it is a group policy, the coverage is pretty basic and not much customization is allowed.
• Loss of Coverage: Once the employee leaves the organization the coverage ends with their employement termination. In some cases, some policies can be converter to individual policies but they will at higher premiums.

Now let us address the third question - How is the premium decided for your group term life insurance policy?

Group term life insurance premium

In most cases, the group term insurance premium is paid by the employers. The premium paid towards the policy is not fixed, it can vary according to the employees (if the employer opts). The premium depends on various factors like the age of the employees, nature of work and the sum assured to the employees.

Why do age, nature of work and sum assured play a major role in deciding the premium?

A group term insurance premium increases with age, because according to the insurer age directly impacts the health and vulnerability. If the employees are involved in high risk jobs then also the premium increases. In case of sum assured, the premium is affected because of the following reason. 

A sum assured amount can be of three types -

1. A flat sum assured - all employees are covered with same sum assured amount irrespective of their designation. Usually opted for small organizations and Startups.
2. A graded sum assured - the employees sum assured is decided by their designation. For instance, an employee in the top leadership would have a greater sum assured than others. Usually applied to organizations with multiple hierarchy. 
3. A salary multiple - when organizations have employees where varying compensations are offered for same level employees.

So as the sum assured increase the premium increases.

How to purchase group term life insurance from Pazcare?

Here are the following steps to purchase your group term life insurance policy from Pazcare -

1. Get in touch with Pazcare. Our insurance experts will revert back to you and help you with the purchase process.
2. Decide the sum assured - a flat or graded sum assured. Along with this, decide on the riders that can be added to your base policy. Remember, riders are not mandatory but an optional benefit.
3. Pazcare insurance experts will provide you with a premium estimate based on the active employee data shared. A group term insurance premium is often cheaper than a retail policy.
4. Once the premium is paid, the master policy copy will be issued. Make sure the employees and the organization is well aware of the terms and conditions of the policy.
5. The employees can use the Paz app for mobile to access the policy. The employers can use the tech-enabled user-friendly Pazcare dashboard to administer the policy.

How to claim group term life insurance?

A group term life insurance death claim can be made with the following documents.

1. A duly filled claim form
2. Policy copy 
3. Original death certificate issued by the local authorities
4. Letter from the employer confirming the death of the employee
5. Identity proof of the claimant
6. Proof of address of the claimant
7. FIR copy (if required)
8. Bank book copy/copy of cheque

With the following documents reach out to Pazcare customer support to help you with the claim process. Once the claim is verified, the claim will be settled to the nominee as per the terms and conditions of the policy.