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Last Updated : Apr 26, 2019 02:48 PM IST | Source:

Explainer | Know your employee group term life insurance cover

The premium is paid by employer and a master policy is issued to the employer.

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Group term life insurance cover provided by employers is a good retention tool. These policies come with one year term and are renewed every year. Here are a few factors you should know as an employee:

Group term life insurance policies (GTL) are issued to groups formed for purposes other than obtaining life insurance. These could be groups of employees of a company, members of a trade organisation and members of associations having a common interest – for example automobile owners association, marathon runners association, etc.

Many employers opt for GTL policies to offer life coverage to their employees. Existing employees are covered from the date of issuance of the policy and new employee gets coverage from the date of joining. The coverage offered to employee may vary from organisation to organisation.


Some organisations offer flat covers – say Rs 5 lakh per employee. Some organisations choose to offer graded covers, for example – Rs 5 lakh, Rs 10 lakh and Rs 15 lakh for workers, management and top executives, respectively.

Some companies offer life cover equivalent to multiple of annul cost to company (CTC) of the employee. If an employee has a CTC of Rs 5 lakh, then applying a multiple of three, he will get a cover of Rs 15 lakh.

Many progressive employers mention clearly the amount of life and health cover an employee is entitled to avail in the schedule of benefits attached to appointment letters given to employees.

Depending on the size of group, average age of the group, occupation mix, sum assured, past mortality experience and other factors, the premium is ascertained by insurer. The premium is paid by employer and a master policy is issued to the employer.

Since premium is borne by the employer, it is an admissible business expense. Hence, employees can’t enjoy tax benefits on the premium paid by the employer on their lives.

Each GTL policy typically comes with a free cover limit or no medical limit. This is a peculiar concept seen in group life policies. The limit is ascertained taking into account sum assured, average age and size of group among other factors.

Members having sum assured up to the limit get covered automatically. Members above the limit are asked to either sign good health declaration or answer health questionnaire or go for a medical examination or a combination of these.

A member failing to clear these underwriting requirements is not denied the life cover. But his sum assured is capped to the free cover limit. For example, if an employer-employee group has a free cover limit of Rs 10 lakh and a member who is entitled for a cover of Rs 50 lakh fails to clear medical examination, then his life cover is capped at Rs 10 lakh.

GTL policies pay the sum assured upon death of the member while in service.

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First Published on Mar 12, 2019 02:31 pm
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