Group Term Life Insurance in India: Meaning and Features

In today’s workplaces, employee well-being goes far beyond a salary or a bonus. Security and peace of mind have become just as important. Whether it’s a small business or a large organisation, every employer wants their team to feel valued and protected. Group term life insurance is one such endeavour - a practical way to extend life cover to an entire group under a single policy, often at a much lower cost than individual plans.

It’s a benefit that not only builds goodwill but also strengthens loyalty. For employees, it’s an assurance that their families will be financially supported in case something unfortunate happens. For employers, it’s a responsible gesture that shows they care about their people.

So, what does this cover mean? How does it work? Why is it becoming a mainstay in India’s employee benefits landscape?

What Is Group Term Life Insurance?

Group term life insurance is defined as a single master policy that offers life insurance cover to a set of people – all of whom are typically employees of a company, members of a professional association, or even customers of a financial institution. Instead of each person buying their own term plan, the organisation purchases one umbrella policy covering all its members.

In the event of a member’s unfortunate death during the policy term, the insurer pays a pre-defined sum assured to the nominee. It’s simple, affordable, and efficient. It is a form of collective protection that doesn’t require each individual to go through lengthy paperwork or medical tests.

How Does It Work?

Group term life insurance is practical and easy to administer, for all types of business organisations or even financial institutions that want to offer add-on benefits to their customers. Here’s how it typically functions in India:

1. Employer or organisation purchases the plan:

The company (or group administrator) selects a suitable plan and defines the coverage amount for each member.

2. Premium payment:

The premium is paid either entirely by the employer or, in some cases, shared with employees. Because the risk is spread across a group, premiums are usually much lower than for individual term insurance.

3. Coverage period:

The cover remains valid for a specific period, usually one year, and can be renewed annually.

4. Claim process:

If a covered member passes away during the policy term, the insurer pays the sum assured directly to the nominee.

Key Features of Group Term Life Insurance

Collective coverage under one plan:

Instead of multiple individual policies, one group policy covers all eligible members.

Customisable benefits:

Organisations can choose uniform coverage for all or decide on varying cover amounts based on employee grades or salaries.

Easy enrolment:

Minimal documentation and simplified onboarding make it quick to include members.

Low-cost premiums:

Since the risk is pooled, premiums are significantly lower than they typically are for stand-alone individual policies.

Optional add-ons:

Some insurers offer riders like accidental death benefit or disability cover for enhanced protection.

Renewable annually:

The policy is generally valid for one year and can be renewed easily, ensuring continuity.

Benefits for Employers and Employees

Group term life cover is a balance of convenience and compassion, and that is why it is increasingly being adopted by businesses of all sizes - from start-ups to large corporations.

For Employers:

• Strengthens employee relations: Offering a group life cover signals genuine care for employee welfare, improving trust and retention.
• Tax benefits: Premiums paid by the employer can often be treated as a business expense.
• Simplified administration: One master policy covers everyone, and there’s no need to manage individual accounts.

For Employees:

• Financial security for families: If something happens to the insured, their loved ones receive a lump sum payout.
• Zero or minimal cost: In most cases, the employer bears the premium, making it a valuable benefit at no personal expense.
• Hassle-free process: No medical tests or long forms - employees are automatically covered once they join the organisation.

Difference Between Group Term Life and Individual Term Life Insurance

A group life insurance plan offers immediate protection as long as you’re part of the group, while an individual term plan provides long-term, independent coverage. While both provide life protection, the approach and structure differ:

Many professionals choose to maintain both - one from their employer, and another personal individual term life insurance plan, to ensure continuous protection even after job changes.

Who Can Buy Group Term Life Insurance?

Group term plans aren’t limited to corporate employees. The following types of entities can also purchase them:

• Registered companies, SMEs, and start-ups
• Banks and financial institutions (for their customers)
• Professional associations and trade bodies
• Non-profit organisations
• Co-operative societies or credit unions

Bandhan Life offers flexible group life cover that can be customised to fit the structure and size of your group, ensuring affordable protection for every member.

Final Thoughts

Group term life insurance is more than just a corporate benefit. It is a thoughtful commitment to people who are employed in the organisation. In India’s evolving workplace culture, where financial well-being matters as much as professional growth, offering a group life cover builds a foundation of security and trust.

FAQs About Group Term Life Insurance

1. Is medical screening required for employees under group term life insurance?

In most cases, one of the biggest advantages is simplified enrolment - employees are covered without individual medical tests unless the sum assured exceeds a certain threshold.

2. What happens if an employee leaves the company?

Once the employee exits the organisation, their cover under that specific group policy ends. However, they can buy individual term insurance plans to continue personal protection.

3. Can employers add riders to enhance coverage?

Yes, many insurers, including Bandhan Life, offer optional riders such as accidental death, total disability, or critical illness to strengthen the protection offered to employees.

4. Are premiums taxable?

For employers, premiums are generally treated as a business expense. For employees, the payout received by the nominee in case of death is exempt from tax under Section 10(10D) of the Income Tax Act, 1961.