Like the individual term plans, a group term plan will reap a fixed amount of money for your family in case you pass away while the policy is active. Normally, employers, professional groups, banks, non-banking financial institutions, NGOs, etc., offer group term plans to their –
- Employees
- Account holders
- Members of the institution/ group
Under this plan, a group of individuals are covered for a specified tenure against the amount of premium. A Group Term Life Insurance covers a group of individuals, where compensation is paid to the family members. In the event of the death of the employee, his/ her family will get financial independence in his absence. Also, employees are given the option to buy additional coverage to extend the scope of coverage.
Types of Group Term Life Insurance
- Employer-Sponsored Group Term Life Insurance
| Basic Group Term Plan | Supplemental Group Term Plan |
| Under this plan, employers pay the premium amount, which is normally in multiples of the employee’s salary. | This benefit is in addition to the basic insurance plan of the employees. Here, the premium amount is to be paid by the employees themselves. |
- Non-Employer Sponsored Group Term Life Insurance
| Association Group Term Life Insurance | Affinity Group Term Life Insurance |
| Under this plan, the members of a group are offered to purchase the term plan from their organisation at discounted rates. | This is on the same lines as the Association Group, besides the difference that it is offered to a particular group of members. |
| Credit Life Insurance | Wholesale Group Term Life Insurance |
| This is provided by lenders to borrowers, where the company pays off the remaining debt in case the borrower dies. | This plan is sold to a particular group, which further distributes it to its members. |
Advantages of Group Term Life Insurance
- Cost-Effective: It is considered to be cost-effective in comparison to a life insurance policy.
- Guaranteed Acceptance: This plan provides guaranteed acceptance, i.e. you cannot be denied coverage depending on your health.
- No Medical Exams: No medical examination is required in most of the policies.
- Employer Contribution: In a normal scenario, employers pay the cost of a premium, hence providing benefits to the employees.
Disadvantages of Group Term Life Insurance
- Limited Coverage: The coverage amount is comparatively lower than that of individual plans.
- Limited Customisation:They offer limited customisation, which makes it difficult to alter the policy.
- Loss of Coverage: This plan gets over once you leave the organisation or associated group.
- No Cash Value: This plan does not offer cash value, which means no amount can be borrowed against this policy.
Conclusion
This plan includes a group of individuals under a single policy, whereas, in some policies, all of them are offered the same amount and level of coverage. On the other hand, some of the plans also offer different amounts and levels of coverage. One should be well aware of its benefits and limitations to avoid any complications.
