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Explained: All about free cover limit in group term insurance policies

Free cover limit is a level of sum assured that is offered to a group of employees without insisting on medical tests

December 02, 2021 / 10:41 AM IST

Life and health insurance covers offered by companies constitute key incentives for employees. Now, the life insurance cover offered through a group platform has several distinct advantages. It is generally cheap, easy to acquire and covers a large group under one policy. Free cover limit (FCL) is one of the key elements in a group term life insurance policy. Here are a few things you should know about it

What is group term life insurance?

A policy on a group platform is issued for one year. It can be renewed each year by the administrator, that is, the employer. In the case of employer-employee groups, the policy is issued in the name of employer and the employer looks after the administration of the policy and deals with the insurer for addition and deletion of employees from the group policy and claims management as well. The employer pays premiums for all employees and offers either flat or graded cover to them. For example, all employees may get a flat sum assured of Rs 5 lakh each or they may get be allocated sum assured of Rs 5 lakh, 7 lakh, 10 lakh and so on based on their grades or designation bands. In some cases, the sum assured is linked to employees’ salaries – for example, the cover could be three times the employee’s annual cost to company (CTC).

What is free cover limit?