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Group Term Life Insurance

Your ultimate guide

What is group term life insurance?

Group term life insurance is generally bought by the association head or employer for the members or employees. Group term life insurance covers the life of a group of people with a sum assured. A lump sum is given to the nominees of the members covered in the policy in case of death.

Group term life insurance meaning

Group term life is a type of life insurance policy. In this policy, when a policyholder expires, his/her family will receive a death benefit. Death benefit is lump sum money given to the nominee of the deceased. A nominee is eligible to receive the death benefit only when the policyholder dies during the existence of the policy. If the policyholder outlives the policy duration, then he/she doesn’t receive any amount.

Group term life insurance example

Let’s assume google buys group term life insurance for all its employees in India from Aditya Birla Sun Life Insurance. The policy lasts from July 2022 to July 2023. The sum assured is 5 lacs. The premium for the policy is paid by Google.

When the policy is bought, Google and the insurer make all employees declare a nominee who they trust as the nominee receives the money. In an unfortunate event, one of the employees dies in September, 2022. Now the nominee of the deceased employee. 

Also read: Group Term Life Nomination Form

Group term life insurance for family

When a company offers group term life insurance, it only covers the employees. The dependents of employees are not included in the policy. However, when something fatal happens to the employees, the family of the employees, who are generally the nominees, benefit from a policy like a group term life insurance. The death benefit of group term life insurance for family helps them financially.

Does term life insurance cover death from illness

Yes, generally death from an illness is covered. However, some insurers may have reservations about critical illnesses like cancer, HIV, etc. In the latter case, you can buy a critical illness rider (add-on) to cover employees from critical illness too. However, checking with different group term life insurance companies before purchasing a policy is a smart way to go about it.

You should also remember that the policyholders, to be eligible for a payout, don’t have to die from a critical illness. If they are diagnosed with a critical illness, they are eligible to get the sum assured that they can use towards the treatment of the disease.

Also Read: Understanding Pre-Existing Diseases In Health Insurance

Critical illness list

Below is the list of the most common critical illnesses that most insurers maintain. However, it is up to the insurer. They can choose their critical illnesses list. However, this is a transparent affair, and users can see the list on the insurer's website and ask for the list when buying a policy.

  • Apallic syndrome or the Universal necrosis of the brain cortex
  • AIDS contracted by medical staff, in case it is caused due to injury or exposure to contaminated blood
  • AIDS due to blood transfusion in case the victim has contracted it due to receiving infected blood.
  • Alzheimer’s disease or other degenerative brain disorder
  • Benign brain tumour
  • Heart attack
  • Heart valve replacement due to defects or abnormalities
  • Coronary artery diseases requiring a bypass or other  surgery
  • Aorta surgery via thoracotomy or laparotomy
  • Stroke
  • Cancer
  • Kidney failure
  • Fulminant viral Hepatitis or massive necrosis of liver caused by a virus which can lead to liver failure
  • Major organ transplant including Kidney, Lungs, Liver, Heart and Bone marrow
  • Paralysis or Paraplegia including the complete and permanent loss of one or all of the limbs
  • Multiple sclerosis
  • Primary pulmonary Arterial Hypertension 
  • Total and/or permanent blindness
  • Total and/or permanent deafness
  • Total and/or permanent loss of speech
  • Parkinson’s disease
  • Coma
  • Third-degree burns covering at least 20% of the surface area of the body
  • Terminal illness
  • Motor neuron disease
  • Chronic liver disease
  • Chronic lung disease
  • Major head trauma
  • Anaemia due to chronic persistent bone marrow failure
  • Muscular dystrophy
  • Benign brain tumour
  • Encephalitis
  • Poliomyelitis
  • Bacterial meningitis due to inflammation of brain membranes or spinal cord
  • Brain surgery (Craniotomy)
  • Other serious coronary heart diseases caused due to narrowing of the lumen of the three major arteries- the Circumflex, right coronary artery (RCA), and Left Anterior Descending Artery (LAD).
  • Full-blown AIDS

Source: SBI life

How does group term life insurance work

Choosing the right policy

Before buying the right policy, one must understand and become aware of the various policies available in the market. In this process, it is very important for the policy-holder to understand the various riders, coverage, and prices that are available in the market.

Underwriting

Once you reach out to an insurer to buy a group term life insurance policy, the insurer will assess the nature and the composition of the group(employees). Employer provides the insurer with details of the employees. Insurers look for risks in their job, age, salary, claim dump from previous years, etc. After this, the insurer can employer can decide and negotiate the offerings and premium. Employees will have to provide the details of their nominees.  The sum assured, benefits, inclusion and exclusions are discussed and finalized.

Premium and issuance

After finalizing, the employer can pay the premium to buy the policy. Group term life insurance is yearly and the premium can be yearly at once or monthly or quarterly. Once the premium is received by the insurer, the policy gets activated and employees can get their policy number and other details required to use the policy.

Mid-term additions, deletions

When you buy the policy you give the insurer the list of employees. All of these employees will be covered in the policy. However, there will be new joiners and people who leave the company. You can add and delete employees in the policy easily with the Pazcare admin dashboard.

Claims

If any of the employees die during the tenure of the policy, the nominee of the employee who died receives the sum assured by the insurance company. They can either directly settle with the nominee or give the sum assured to the company and the company will give it to the nominee.

Also Read: Group Term Life Insurance Claim Settlement Ratio

Expiry of the policy

After one year of the activation of the policy, it gets expired. The organization should renew its policy to enjoy the continued cover.

Is medical check-up required for term insurance?

In term life insurance, some policies by some insurers require a medical check-up and some don’t. Based on the policy you choose, your insurer may or may not ask you to go through medical tests.

Medical check-ups are done before buying an insurance policy to check for the current diseases of the policy buyer. These are called pre-existing diseases in insurance. With a pre-existing disease, you are more likely to die than someone without. So insurers would want to understand your health status before giving out a policy.

Frequently asked questions

What is the tenure of a group term life insurance plan?

Group term life insurance is for one year. It is renewed by the employer every year.

What are the benefits of group term life insurance schemes to employers?

It helps employers promote employee wellbeing by offering group term life and health insurance to employees. This also helps attract talent to their company.

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