Group Term Life Insurance

Group term life insurance covers many individuals under one policy. Know the key features, benefits it offers to employees and employers, and how the plan works.
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3 min
10 April 2025

Group term life insurance policy is a benefit that many companies offer to their employees. It offers an affordable way for employees to secure the financial future of their family in case of an unforeseen incident. A group term life insurance policy provides coverage for a group of people, typically employees, under a single contract.

Being a part of a company that provides its employees with a group term life insurance policy can be a lifesaver. It is a great way to ensure that the employee's family is taken care of financially when they are no longer with them.

What is group term life insurance?

Group term insurance plan is a type of insurance policy that provides coverage for a group of individuals. Employers usually offer group term life insurance as a benefit to their employees. The primary purpose of group life insurance is to provide financial protection to the beneficiaries of the employees in case of their untimely demise. The coverage for this policy is temporary and ends after a specific term. The premiums for group term insurance plans are typically lower than other policies due to the group nature of the insurance. Group term insurance is a valuable benefit that can help provide peace of mind to employees and their families.

How does group term insurance work?

A group term insurance policy covers a group of people under a single contract. The employer arranges for the insurance company to provide coverage for its employees. Typically, the employer pays the premium, and the employees are beneficiaries of the coverage.

The premium for a group term life insurance policy depends on the age, occupation, and salary of the employees. Group life insurance premium is usually cheaper than that of individual life insurance policies. However, the coverage amount may not be as comprehensive as individual policies.

Key features of group term life insurance

Group term life insurance benefits and features include the following:

1. Death cover: 

The primary feature of the group term life insurance policy is the death cover. This cover provides financial coverage to the nominee in case of the employee's unfortunate demise, ensuring their family’s financial stability and protection from sudden loss of income. It helps dependents manage expenses like household costs, children’s education, and outstanding debts.

2. Gratuity benefit: 

Gratuity benefit is another feature of a group term life insurance policy. It provides a lump sum payment to the employee who has served the company for a specified period, acting as a financial reward for long-term service. This benefit helps employees plan their retirement better and secure their financial future after leaving the organisation.

3. Group credit protection plan: 

A credit protection plan is a feature, a group term life insurance benefit rather, that provides financial coverage to the group if any of the members cannot repay their loans due to unforeseen circumstances like death or disability. This ensures that the burden of repayment does not fall on the borrower’s family, protecting them from financial distress and legal complications.

4. Comprehensive coverage:

It protects the group from multiple risks such as sudden death, accidental death, and critical illness. This ensures financial security for employees and their families by covering unexpected medical expenses, treatment costs, and loss of income due to severe health conditions. It provides peace of mind, knowing that they are financially protected against life’s uncertainties.

5. Premium payment flexibility: 

Group term life insurance plans offer flexible premium payment options such as monthly, quarterly, or annually, making it convenient for employers to manage costs. Premiums can be paid entirely by the employer or shared with employees, depending on the policy agreement.

6. Experienced fund management: 

These plans are often managed by seasoned fund managers who ensure that the insurer maintains adequate reserves and financial health. This adds a layer of confidence and trust in the insurer’s ability to meet claims efficiently.

7. Portability option: 

Some group term insurance policies offer portability, allowing members to convert their group coverage into individual plans upon leaving the organisation. This ensures continuous life cover without interruption or the need for fresh underwriting.

8. Cost-effective solution: 

Group term life insurance is generally more affordable compared to individual policies. The risk is spread across multiple members, allowing insurers to offer lower premiums, making it a cost-effective option for employers and employees alike.

9. Employee cover by default:

Group term life insurance automatically covers eligible employees under a single policy. This means employees get life cover from day one, without individual applications or medical tests in most cases, making the process simple and seamless.

10. Seasoned fund managers:

Group term life insurance plans are designed and managed by experienced professionals who structure the policy efficiently. Their expertise helps ensure stable administration, smooth claim handling, and well-managed coverage terms for both employers and employees.

11. Master contract:

A group term life insurance policy operates under one master contract issued to the employer. This single agreement governs coverage for all members, making administration easier, reducing paperwork, and ensuring uniform benefits across the entire employee group.

12. Affordable:

Group term life insurance is cost-effective because risk is spread across many employees. Employers benefit from lower premiums compared to individual policies, while employees receive valuable life cover at minimal or no direct cost.

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Key benefits with group term life insurance

Group term life insurance policy serves as a cost-effective way for employers to provide valuable financial protection, enhancing overall employee well-being.

  • Financial security for employees' families: Group term insurance ensures that in case of an employee’s unfortunate demise, their family receives a lump sum payout. This financial support helps cover daily expenses, education costs, and outstanding liabilities, providing much-needed stability during difficult times.
  • Affordable premium rates: Since the policy covers multiple individuals under a single plan, the premium rates for group term insurance are lower compared to individual life insurance policies.Employers can provide substantial coverage to their employees at minimal costs, making it an economical benefit.
  • Customisable coverage options: Organisations can customise the group term insurance policy based on their workforce's specific needs. Coverage can include accidental death benefits, critical illness riders, disability protection, or additional payouts, ensuring comprehensive financial protection.
  • Tax benefits for employers and employees: The premiums paid for group term insurance qualify for tax benefits under the Income Tax Act. Employers can claim deductions on the premium paid, and employees may receive tax-free death covers, making it a financially beneficial option for both parties.
  • Gratuity and employee retention: Some group term insurance policies integrate gratuity benefits, rewarding employees for their long-term service. This enhances job satisfaction, boosts morale, and improves employee retention rates within the organisation.
  • Easy enrolment and hassle-free claim process: Group term insurance policies have a simple onboarding process with minimal documentation. In case of a claim, the payout process is streamlined, ensuring quick financial support for the nominee without unnecessary delays.

Limitations of group term life insurance

Group life insurance plans, especially those offered by employers, provide basic life cover at a low or no cost. However, while they offer convenience, they may not offer comprehensive protection. Here are some key limitations of group term insurance plans you should be aware of:

  • Limited coverage amount
    Group life insurance generally offers a lower sum assured compared to individual plans. This might not be enough to meet your family’s long-term financial needs in case of your absence.
  • Coverage ends with employment
    Since group term life is usually employer-sponsored, your coverage ends when you leave the job. This leaves you unprotected unless you have a separate personal policy in place.
  • No customisation options
    A group term insurance plan typically offers a one-size-fits-all approach. You can't customise it with additional riders like critical illness or accidental death benefits to match your specific needs.
  • No maturity or cash value benefit
    Group term insurance is pure protection—it doesn’t offer savings or investment components. You won't get any return or maturity benefit if you survive the policy term.
  • Dependent on employer’s discretion
    Your coverage details, including sum assured or renewal, depend on your employer’s decision, not yours.

How does group term life insurance benefits your employees?

Here are some group life term insurance benefits that employees can enjoy:

1. Financial coverage:

Group term life insurance benefits provide financial security to the employee's family when they need it the most.

2. Lower premiums:

Group term life insurance benefits provide tax benefits to the employee, as the premium paid for the policy is tax-deductible.

3. Tax benefits:

Group term insurance provides tax benefits to the employee, as the premium paid for the policy is tax-deductible.

4. Add-ons:

Group term insurance policies provide add-ons such as critical illness cover and accidental death cover, which can benefit the employee and their family in case of any unfortunate event.

5. No medical check-up:

Employees can get coverage under a group term insurance policy without undergoing a medical check-up, which saves them time and money.

Benefits of group term insurance for employers

Here are some benefits of group term insurance for employers as well:

Reduces employee attrition:

Employers who offer group life insurance to their employees tend to have a lower attrition rate than those who do not. Employees feel more secure and valued when their employer takes measures to ensure their financial security, leading to higher job satisfaction and long-term retention.

Boosts employee performance:

A happier and more secure employee tends to be more motivated and productive, which can benefit the employer's overall performance. With reduced financial stress, employees can focus better on their work, improving efficiency and workplace morale.

Builds credibility:

Offering group term insurance can help build a company's credibility and reputation, which can attract new employees and customers. Providing such benefits like group life insurance reflects a company’s commitment to employee well-being, enhancing employer branding and positioning the company as a responsible organisation.

Enhances employee benefits package:

Adding group term insurance strengthens an organisation’s employee benefits package, making it more attractive to potential hires. A comprehensive benefits plan gives employers an edge in hiring and retaining top talent in a competitive job market.

Provides tax benefits:

Employers can avail tax deductions on the premiums paid for group term insurance under applicable tax laws. This reduces the financial burden on the organisation while ensuring employees are covered.

Encourages employee loyalty:

Employees appreciate organisations that invest in their well-being. Providing financial security through group term insurance fosters trust and loyalty, reducing turnover and improving workplace culture.

Key advantages and disadvantages of group term insurance

Here is a quick overview of the pros and cons of group term insurance:

Advantages

Description

Disadvantages

Description

Affordable premiums

Group term life insurance is cost-effective as the premiums are lower compared to individual policies, making it a budget-friendly option for employers and employees.

Limited coverage

The coverage amount may not be sufficient to meet all financial needs, requiring employees to buy additional personal life insurance.

Financial protection

Provides financial security to the employee’s family in case of untimely demise, helping cover expenses like debts, education, and daily needs.

No ownership of policy

Employees do not own the policy, and coverage is lost if they leave the organisation, making it unreliable for long-term security.

Easy enrolment

Employees are automatically enrolled with minimal paperwork and no medical tests, ensuring hassle-free access to coverage.

No customisation

Group policies offer limited flexibility, with standard coverage that may not suit individual financial goals or specific protection needs.

Tax benefits

Both employers and employees can avail tax benefits on premiums and payouts under applicable income tax laws.

Coverage depends on employment

The policy remains active only while the employee is part of the organisation, leading to gaps in coverage after job changes.

 

Types of group term life insurance

There are different types of group term life insurance plans tailored to organisational needs:

  • Employer–employee group term plan: Offered by companies to provide life cover to employees.
  • Non-employer–employee group term plan: Group life insurance covers members of clubs, associations, or NGOs.
  • Contributory group plan: Premiums are partially or fully paid by members.
  • Non-contributory group plan: Entire premium is paid by the employer or group sponsor.
  • Group term insurance with riders: Group life insurance includes additional coverage like critical illness or accidental death.
  • Renewable group term plan: Offers yearly renewable life cover based on group size and changes.

Key factors that affect the group term life insurance

Following are the key factors affecting group term life insurance:

  • Size of the group: The number of employees covered under the policy impacts the overall premium and benefits. Larger groups often get lower premium rates due to risk distribution.
  • Average age of employees: Younger employees generally reduce the overall risk for insurers, leading to lower premiums, whereas an older workforce may increase costs due to higher mortality risks.
  • Coverage amount: The sum assured for each employee influences the premium. Higher coverage results in higher premiums but provides better financial security.
  • Health conditions of employees: Although group term plans do not require medical tests, insurers assess the overall health profile of the group, which can impact policy costs and coverage terms.
  • Type of coverage and riders: Additional benefits such as accidental death, disability cover, or critical illness riders increase protection but also raise the premium amount.
  • Employer’s contribution: The extent to which the employer funds the policy affects the cost structure. Fully employer-funded plans tend to have higher participation rates.
  • Policy tenure: The duration of the group term life insurance plan affects premium costs, with longer-term policies offering more stable pricing structures.
  • Claim history of the group: A group with a history of frequent claims may face higher renewal premiums, while a low-claim history can help maintain affordable rates.

Eligibility criteria for group term insurance

The eligibility criteria for group term insurance include the following:

  • Companies must have a minimum of 10 employees to be eligible for a group term life insurance policy.
  • Employees must be between the ages of 18 and 65 to be eligible for coverage.
  • Employees must be on the company's payroll to be eligible for coverage.

Important aspects of group term life insurance

When choosing group term life insurance, consider these important factors:

  • Eligibility criteria: Only defined groups can be insured under one plan.
  • Policy tenure: Usually group term insurance plan is offered on an annual renewable basis.
  • Sum assured flexibility: Based on employee designation or fixed sum.
  • Customisable features: Group term insurance plans can include riders for additional benefits.
  • Tax benefits: Premiums may be eligible for tax deductions under Section 37(1).
  • Medical tests: Often waived for members within a certain age limit or sum insured.
  • Premium payment: Can be a single annual payment or periodic instalments.
  • Claim process: Claims are typically settled through the employer or group admin.

What does a group term insurance plan not cover?

While group term insurance plans offer wide coverage, there are some exclusions:

  • Suicide in the first year: Not covered under most group term insurance plans.
  • Self-inflicted injuries: Deaths due to intentional harm are excluded.
  • Illegal activities: Death during criminal acts or illegal activities is not covered.
  • Pre-existing illnesses: Group term insurance plan may not be covered if not disclosed or within a waiting period.
  • Alcohol or drug abuse: Claims may be rejected if death is linked to intoxication.
  • Non-disclosure: Failure to disclose health or personal details can void the claim.
  • Lapsed policy: If the premium is not paid, the policy becomes inactive and claims will not be honoured.

How to get group term life insurance?

Here are the steps to follow when buying group term life insurance.

  • Research and identify insurance providers: Look for insurance companies that offer group term life insurance policies. Compare different insurers based on their policy offerings, claim settlement ratios, and customer reviews.
  • Evaluate the insurer’s reputation and financial stability: Check the company’s financial strength, market reputation, and history of claim settlements. A financially stable insurer ensures reliability in claim payouts.
  • Analyse policy features and coverage options: Assess the key features of the group term insurance plan, including death benefits, riders (such as accidental death or critical illness cover), premium structure, and exclusions to ensure it meets the organisation’s needs.
  • Determine the sum assured and premium structure: Decide on the coverage amount for employees and the premium contribution model—whether it will be employer-funded, employee-funded, or shared. Ensure affordability while maintaining sufficient coverage.
  • Verify the eligibility criteria: Check the insurer’s requirements regarding the minimum and maximum number of employees, age limits, and employment tenure to ensure all eligible members can be covered under the group term insurance plan.
  • Gather and submit required documents: Collect necessary documents such as employee details, company registration proof, and financial statements. Submit the completed application form along with the required paperwork for policy issuance.
  • Review terms and conditions before finalising: Carefully read the group term insurance policy document, including exclusions, renewal terms, and claim procedures. Seek clarification from the insurer if needed before signing the agreement.

How to apply for term life insurance on Bajaj Finance Insurance Mall?

Here’s how you can apply for term life insurance plans on Bajaj Finance Insurance Mall.

  • Visit the Bajaj Finance Insurance Mall
  • Choose a life insurance plan and click on ‘Get Quote’.
  • Enter personal and other details like how much you want to invest, name, mobile number etc.
  • Enter a few additional details like your source of income, lifestyle etc.
  • Upon entering all the details, you will view all plan details. Click on ‘Buy Now’ to proceed.
  • Bajaj Finance representatives will call you back to explain the product details and help you buy a plan that suits you best.

Group term life insurance is a great way to ensure that employees and their families stay financially secure in case of an unfortunate event. There are multiple benefits of having a group term life insurance policy for both employers and employees. Companies that offer group term life insurance to their employees show that they care about their employees' financial security.

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Frequently asked questions

Is group term life insurance taxable?

Group term life insurance premiums paid by the employer are tax-deductible for the employer and are not taxable for the employee. However, the death benefit received by the beneficiaries is taxable in some cases, depending on the circumstances.

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

The tenure of a group term life insurance plan depends on the policyholder's requirements and the insurance provider's policy. Most group term life insurance policies have a tenure of one year or more, depending on the policyholder's preference.

What is the minimum sum assured under the group term life insurance scheme?

The minimum sum assured under the group term life insurance scheme varies between insurance providers and policyholders.

Will my group term life insurance end if I leave my job?

Yes, group term life insurance is linked to your employment. If you leave the company, the coverage typically ends unless the insurer allows policy conversion to an individual plan.

Is it possible to switch from group term life insurance to a personal plan?

Yes, many insurers allow conversion of a group term life insurance policy to an individual plan if you leave the organisation. You may need to meet certain conditions and the premium for the new policy will be based on your age and health status.

What factors influence the premium of group term life insurance?

The premium for group term life insurance is determined by the group size, average age of members, occupational risk, sum assured, and coverage features. Health checks may be waived, and larger groups often enjoy lower premium rates due to risk distribution.

What if an employer discontinues the group term insurance policy?

If the employer discontinues the group term life insurance plan, the coverage for employees ends immediately. In such cases, employees can consider buying individual term plans or opt for conversion options if available, to maintain life cover without interruption.

Is there any maturity benefit in group term insurance plans?

Group term insurance plans generally do not offer maturity benefits. These plans are designed solely to provide life cover for a specific duration and don’t have savings or investment components.

Can riders be added to enhance coverage in group term insurance plans?

Yes, some group term insurance plans offer optional riders such as accidental death cover or critical illness cover. However, the availability of riders depends on the insurer and the plan structure selected by your organisation.

Can self-employed individuals buy group term life insurance?

Typically, group term plans are for organisations or employers. However, self-employed individuals can join professional associations or groups that offer group life insurance to members.

What is the claim process like for group term life insurance?

The nominee needs to submit a claim form along with required documents to the insurer. The employer or group administrator often helps streamline and support the claim process.

Who is responsible for paying group term insurance premiums?

Premiums can be paid fully by the employer, shared with employees, or entirely employee-funded—depending on the company’s group insurance policy structure.

Who is eligible to receive coverage under a group term life insurance policy?

Group term life insurance typically covers members of an organisation—such as employees, workers, or association members. The employer or group administrator provides coverage, ensuring basic financial protection for all eligible participants under a single master policy.

How are premiums decided for group term life insurance plans?

Premiums for group term life insurance depend on factors such as group size, average age, occupation risk, coverage amount, and selected riders. Larger groups often enjoy lower premiums since the risk is spread across many members.

Are medical check-ups needed to get group term life insurance coverage?

In most group term life insurance plans, medical tests are not required for employees at the time of joining. Coverage is typically provided automatically, subject to eligibility rules defined in the policy.

What is the process for nominees to claim benefits under group term life insurance?

Nominees can raise a claim by informing the employer or insurer and submitting required documents. Once verified, the insurer processes the claim and pays the sum assured as per policy terms.

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*T&C Apply. Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Life Insurance Limited (Formerly known as Bajaj Allianz Life Insurance Company Limited), HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj General Insurance Limited(Formerly known as Bajaj Allianz General Insurance Company Limited), SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Company Limited, Star Health & Allied Insurance Company Limited, Care Health Insurance Company Limited, Niva Bupa Health Insurance Company Limited, Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limited under the IRDAI composite registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure & policy wordings carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also distributor of other third party products from Assistance service providers such as CPP Assistance Services Private Limited, Bajaj Finserv Health Limited. etc. All product information such as premium, benefits, exclusions, value added services etc. are authentic and solely based on the information received from the respective Insurance company or the respective Assistance provider company.

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