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Term insurance insures an asset (in this case, your life) for a specified period of time (term). The peril insured in term insurance is death.Group Term Insurance therefore, is term coverage offered to a group of people (generally employees of an organization). This coverage provides a monetary benefit to the beneficiaries (generally the legal heir of the Insured employee) if the employee dies during the pre-defined period (the term).
We, as individuals, do not understand risk. It could be an evolutionary thing, but we are just not programmed to understand let alone appreciate the fact that some calamity could strike us and we could be dead tomorrow.Because we do not understand this risk, we do not prepare for it - if your thought goes to the deduction for the pension plan, that is our investment to prepare for the long healthy lives we plan to live after retirement. The Government thus has to swoop in to give us exemptions on taxes so that we insure ourselves not only for medical emergencies but for unforseen calamities that could leave our loved ones bereaved, of our emotional support and more importantly the financial one. Even so, we have forced the market to design products that combine term plans with annuity, because again, we plan to live forever.But when we buy these hybrid products, the death benefit is a meager amount, which in most cases, is not even adequate to sustain the family's current standard of living, let alone sustain the financial blow meted by your physical absence.
Have you ever noticed the sense of pride in the elder folk when they talk about their employers? This pride is rooted in the sense of belonging that their employers fostered, especially after untimely separation. The kind of goodwill such a sense of belonging creates is disproportionate, no amount of money can buy it. And that precisely is the reason why Group Term insurance is important. It creates that sense of belonging for you.
As of 2022, the Indian market is served by 24 Life Insurers who provide a Term cover. While the covers offered by most of the Insurers are comparable, service delivery is the one aspect a Client should not sacrifice on. The Group Term Life Insurance Policies are offered by almost all the companies. To name few - TATA AIA, Maxlife, Metlife, ICICI Prudential, HDFC Standard Life, Pramera Life, Reliance Life, Birla Sun Life etc.,
As with other types of Employee Benefits, Group Term insurance generally works out cheaper than Term insurance for individuals. The claim ratio in Group Term policies is also significantly on the lower side, especially for white collared workers. It is therefore one of the key pillars of most Employee Benefit programs. The premiums are based on the employee demography, the proposed sum assured, the company's death experience, and the nature of occupation of the employees. It is only recently that Insurers have started graduating to nuanced matrices that include aspects like geography for calculation of premiums.
One master policy covers all members of the Group.
Annual plans that give Employers the option of switching Insurers when service delivery is not satisfactory.
Policy can be bought with a headcount as low as 10 employees.
Total Sum assured is payable on death irrespective of whether the death is natural or accidental.
Additional benefits include critical illness, disability & hospitalization covers.
Addition and deletion of Group members on a pro-rata basis.
No health tests required for Group members up to a defined sum assured limit which is called ‘Free Cover Limit’. Health tests applicable to members who have sum assured above the Free Cover Limit.
Mid Term addition deletion
Mid term additions in the existing policy are allowed only by virtue of marriage or child birth, premiums are charged on a pro-rata basis; deletions are by virtue of death, premiums are retained in case of death, in lieu of the claim that would be settled.
Advance premium deposit with Insurer
As per section 64Vb of the Insurance Act, the insurer can provide the risk coverage only after they have received the premium for the risk coverage. Accordingly, the Insurer maintains an advance premium deposit for group policies. As long as the Insured maintains adequate premium with the Insurer, the employee is covered from day 1 of joining/ or the day as has been underwritten in the policy. In the absence of adequate premium however, coverage starts from the date of receipt of premium at the Insurers end. Hence, it is advisable to maintain sufficient advance premium deposit balance with the Insurer.
An enrollment tool to that effect should be capable of showing you the advance premium balance available at any point in time.
Can the Sum Insured be changed in the mid term of the policy?
No, sum assured cannot be changed midterm unless the sum assured for the whole group or the hierarchy is being revised. Sum assured can also be changed if any person has been promoted during the policy duration and the new designation enjoys a higher sum assured.
Insurers require the following information for each member of the group
Are the benefits under the Group Term Life Insurance Taxable?
Group Term Life Insurance provides tax exemption under Section 80 C. This exemption can be availed by (1) retail customers - who are paying premiums for their own policoes & (2) employers - who are paying premiums for group policies. Death benefits are also exempt from Income Tax under Section 10 D.
Free Cover Limit or FCL in Group Term Life Insurance policy
The free cover limit in Group Term Life Insurance Policy is the amount of cover an employee gets without undergoing medical underwriting or submitting evidence for the required sum assured under the policy.
The free cover limit as mentioned above depends on three factors which are given below
Employees who do not go through medical underwriting or are deemed high risk during underwriting will not be covered up to the sum insured and only have coverage up to the Free Coverage Limit.
Let's say an organization wants to insure a 59 year old employee for 5 crores.
An insurer may set a FCL limit of 2 crores based on the demographics. Thus, this employee's benefits are restricted to 2 crores until he goes through the medical underwriting process. Once the medical underwriting is completed, the insurer will increase his coverage to 5 crores. In the event that an employee fails to go through medical underwriting, or if the insurer declines to offer full coverage, only 2 crores of premium will be charged and the balance will be refunded.
How are premiums calculated?
Group Term Life Insurance policies premiums are calculated based on the employee demography, the proposed sum assured, the company's death experience over the last 3 years, and the nature of occupation of the employees. The premiums will vary based on the group size and kind of industry. Premiums for white collared workers are generally cost effective. Premiums for blue collared workers are dependent on the kind of risk exposure.
Who can be the group term life insurance beneficiary?
The Beneficiary or Nominee is to be declared by the PolicyHolder. They can be immediate family members, spouse / Children / Parent / a friend too. In case if the non family member is declared as nominee, They have to prove their insurable interest to the Insured. A nominee can be changed via a declaration to the Insurer, in case of a death the latest declaration is considered by the Insurer. One can also declare multiple nominees by mentioning the % of the benefit to each nominee.
Can the member carry the policy when they leave the group?
No, all benefits under the policy are terminated when a member leaves the group.
Open Enrollment Period
This is typically when the new policy is taken or when the renewal is done. This has a cycle of one year. All the employees have the option of enrolling into the policy by adding or deleting, making changes in the dependents list, opting in or opting out of optional covers. Once the submission is done, the coverage freezes for one year and no mid-term changes are allowed.
Actively At Work Clause
The members of the group who are actively at work at the time of admission to the scheme will be covered subject to satisfying the “Actively at work” condition mentioned under the policy. An employee is actively at work which means that the member or employee should not have been absent for a continuous period of 10 or more days due to any health reasons such as illness, sickness or maternity leave at the time of taking policy. Those who are not "Actively at Work" would not qualify under the Group Term Life Insurance, unless they return to work and the organization informs the insurer that they are working again. This clause can be waived off for renewal of Group Term Life Policies during negotiations.
Death due to Suicide
Normally death due to Suicide is excluded in any Term Life Insurance policy. However you can get it included in the Group Term Life policy with little loading in premium.
Once you have decided on buying a Group Term Life policy for your employees, the next logical question is, how much should you insure employees for? How does one quantify the worth of an individual, to their family? What amount of payment would denote sincere gratitude as also be an appropriate amount that could take care of the family's immediate financial needs. Perplexing as the questions are, the best way to fix Sum Insured is to fix the slab for the largest amongst
Sum Insured as per EDLI Sum Insured as per FSG x times CTC
Communication (of benefits) is one tool that can create, magnify or destroy the value of the benefit being offered. Gustave Flaubert, who had famously said, There is no truth, only perception of it, couldn't possibly agree more. The way these benefits are perceived significantly influences the culture you are trying to foster. And therefore presenting a comparative analysis not only gives the Employer an edge, but can also safeguard them from any legal trouble arising out of demands for multiple payments under different heads like EDLI or FSG.
Choosing the right insurer for Group Term Life Insurance involves balancing various factors. Here's a guide to help you make an informed decision:
Coverage needs: Consider factors like age, income, dependents, and liabilities to determine the required sum assured.
Additional benefits: Do you need riders like accidental death or critical illness cover?
Financial strength: Opt for insurers with a strong financial track record and high claim settlement ratio (CSR). IRDAI publishes the CSR data annually.
Network hospitals: If riders involve hospitalization benefits, check the insurer's network hospitals for accessibility and quality.
Customer service: Research the insurer's reputation for prompt claim settlement and efficient customer service. Online reviews and forums can offer insights.
Get quotes from multiple insurers: Don't rely on a single source. Use the services of an insurance expert like an Insurance Broker.
Compare plan features: Look beyond just premiums and compare coverage details, exclusions, and rider options. Understand the terms and conditions: Read the policy document carefully to avoid future surprises.
Insurers tend to cap the maximum sum insured that can be chosen for an individual under the group. This number generally is capped at 20 times the individual's annual income. That is however the maximum that the Insurer would allow you to opt for. There could also be times when the Insurer could cap the sum insured at a much lower multiple of the annual salary, depending on factors like professional hazard, age of the employee and previous claims experience. You could also opt for a lower multiple like 10 times the annual income, depending on your budget.
Yes, all coverage under Group Term Life policies generally starts from Day 1. There are no waiting periods under Group Term Life policies.
Generally speaking you cannot be covered under multiple Group Term Life policies. You could however be covered under the Employers Group Term Life policy and your own individual term life policy.
Claim payout is the final stage in an insurance policy which is also a very important stage as one should be able to identify the payout option that should be exercised by the insurer at the time of claim settlement which would ultimately benefit the family members of the insured. Claim payout can be done in different ways, such as lump sum payout, payout as monthly income, and increasing payout, depending on the option chosen by the insured. Earlier, there was only one claim payout option in which the entire claim proceedings were given to the insured's nominee. Still, in time, many other payment options have been introduced by insurance companies. The variations in payment options could benefit the insured and the insurer. In the case of the insured, the family members would receive the compensation as per their needs and requirements, whereas, in the case of the insurance company, they could settle the claim amount in parts, thereby reducing their burden of lump sum payment.
In non-life insurance plans, the claim payout is done on a lump sum basis. Still, in the case of life insurance plans, there are different options for claim payment ranging from lump sum to monthly payments, and even a combination of these plans can be opted by the insured. This article focuses on the claim payout options available in life insurance plans and then explains various factors to be considered before selecting the payout option.
This is the oldest known payment option and the most common payment option available in life insurance plans. As the name suggests, the entire sum assured would be paid to the nominee or the insured's family members upon their death during the policy period as a lump sum. The family member (s) or nominee (s) can decide how to utilize the sum assured. For example, Mr. Vipul has taken a term life insurance plan of Rs.1 Crore and mentioned his spouse as the policy nominee. If Mr. Vipul expires during the policy term due to any unfortunate event such as an accident, disease, or illness, then the entire Rs.1 Crore would be paid as a lump sum amount to the spouse. It should be specified that the claim will only be paid upon the policyholder's death during the policy's duration. There are many advantages and disadvantages to this kind of payout option which are mentioned below:
Advantages:
Dis-Advantages:
The other option is the income or periodic option, in which the claim amount would be paid periodically in equal installments. For instance, equal monthly payments for a certain period of time would be paid under this payout type. The period of payments can range from a few years right up to the spouse's death. Let us consider the above example of Mr. Vipul, who had opted for the Periodic payout option in which his wife would get the monthly payout for a certain number of years or till her death. The advantages and disadvantages of income or periodic payment options are mentioned below:
Advantages:
Dis-Advantages:
This type of payout is similar to the periodic payout, with an additional option to get increased payment every year. Every year the payment would be increased by a certain percentage. For example, if you have chosen this option and opted for a 5% increase every year, then the payout would increase by 5% every year, applicable on the monthly payout. For example, Mr.Vipul can opt for this payout type and select a 5% increase every year, in which case the monthly or periodic payout would be increased by 5% every year for a certain number of years.
Advantages:
Dis-Advantages:
This payout option combines the lump-sum and periodic payments in which a certain part of the sum assured would be paid as lump-sum, and the remaining part would be paid in equal monthly installments. For example, Mr.Vipul had taken a life insurance plan worth Rs.1 Crore and opted for a lump-sum and periodic payment option in which he had selected 50% amount as a lump-sum and 50% as a periodic payment. In case of his death, his nominee would get Rs.50 Lakhs as a lump-sum amount and Rs.50 Lakhs in periodic installments.
Advantages:
Dis-Advantages:
Lump-sum + increasing payout option is considered the best of all the available options since it tries to address all kinds of situations. Under this option, a certain percentage of the sum assured would be given as a lump-sum amount, and the remaining percentage of the sum assured would be given as periodic payment with an option of increasing every year. For example, Mr. Vipul had taken a life insurance policy of Rs.2 Crore and opted for this option with a 50% lump-sum payment and a 50% payout option. In case of his death, his family would get Rs.1 Crore as a lump-sum amount immediately, after which they would get a monthly amount (say, Rs.50k) with a certain percentage (say, 5%) increase yearly.
Advantages:
Dis-Advantages:
The return of premium option is considered a payout option in the case of life insurance plans in which the entire premium paid would be returned to the insured in case of survival of the insured beyond the policy period. The payout would be applicable only if the insured survives the policy period. If the policyholder dies during the policy's term, the assured amount will be returned as a claim reward. This option is available in term insurance plans, but the premium to be paid for plans with this option would be higher when compared to the pure term insurance plans, which do not have any survival benefit.
Many claim payout options are available to the customers. However, selecting the best option while taking the term life insurance plan is important as it plays an important role in claim settlement. One should think twice before opting for the payout option instead of regretting afterward.
One of the major things to consider while selecting the payout option before buying a life insurance plan is your future income requirement. You should be able to calculate the income your family requires to sustain in case of your death. For example, you might have taken a home loan of Rs. 50 Lakhs and have children who would require an amount for marriage and higher studies. Remember, you should decide the payout option as you cannot decide the time of your death, but you can decide how the claim amount can be utilized. Additionally, it is essential to consider what your family may require in the event of your passing. It is important to consider future income requirements and decide properly if you are the only bread earner in your family.
The other important thing to consider is your current liabilities. Your sum assured or life insurance cover should also factor in your loans. One need not go by the general principle of 10-20 times the yearly income as a sum assured while buying the life insurance policy since it might not reflect your other obligations, such as loans. If you have current liabilities, you can opt for a periodic payment option or a lump-sum + periodic payment option depending on your level of liabilities. If you want to clear the liabilities immediately, you can opt for a lump-sum option or periodic payment option if you want to clear them over time.
The most important factor to consider while selecting the payout option is whether your family can handle the claim proceedings. It would be best if you asked yourself the below questions before selecting the payout option:
There can be major life events, such as children's marriage or education, requiring considerable money. It would help to consider such major events before selecting the payout type, as these events cannot be managed with periodic payment options.
For more details on selecting the payout option in life insurance plans, please book a call with our life insurance experts at Ethika insurance broking.
The governments in India have traditionally adopted a fatherly treatment toward people employed in various industries in the country. Manufacturing that formed the backbone of the country for a good five decades since independence employed a substantial chunk of the population. The state ensured that these employees led a tenable life after retirement by legislating laws to ensure pensions and gratuity.
A growing gap was, however, felt toward financial security of families of employees who would die young and during the course of employment. This led to the enactment of the EDLI Scheme in 1976.
The scheme was devised as an instrument to provide a financial guarantee for the families of employees who died during the period of employment.
The EDLI scheme is thus comparable to the modern day Term insurance policy as offered by most insurers. EDLI is mandatory for setups that employ 20 or more people and the premium for the policy is to be borne entirely by the Employer @ a rate of 0.51% of wages. EDLI is applicable for employees whose salary does not exceed ₹ 15,000 per month; the maximum contribution toward EDLI for the employer is capped at ₹ 75 per month, which makes it an annual contribution of ₹ 900.
The natural question that therefore arises is, why not offer a Term life cover to employees instead of EDLI? Let's look at a head to head comparison of some of the important aspects of the two products
Head |
EDLI |
Term Life in lieu of EDLI |
|---|---|---|
| Statutory requirement for coverage | Salary < ₹ 15,000 per month | nil. |
| Maximum annual contribution | maximum monthly contribution is capped at ₹ 75 which takes the maximum annual contribution to ₹ 900 | nil. |
| What benefits can be availed with such a contribution? | Death | Death Terminal Illness Critical Illness Hospitalization Disability |
| Minimum assured benefit | ₹ 2,50,000 | defined by the terms of the policy |
| Premium payment | non-discriminatory i.e. the Employers contribution is a function of the salary alone, age which is one of the most important parameters to decide on premium payment is immaterial | positive discrimination i.e. a younger demography can get the Group Term cover for cheap |
| Frequency of premium payment | Monthly - before the 15 of the next month | Annual, installment facility can be sought from the insurer in case of a large group |
| Fine in case of default in payment to the EPFO | starting @ 17% for a month to about 37% for 6 months | Employers maintain a Cash Deposit account with the Insurer and keep enough funds in the account to ensure Day 1 coverage for new joiners |
| Claim amount receivable | Maximum benefit receivable is 35 times the average monthly salary in the last 12 months. Example - If the average monthly salary over the last twelve months is ₹ 15,000, EDLI = ₹ 5,25,000 i.e. (35*15,000) + bonus of ₹ 1,75,000 = ₹ 7,00,000 |
defined by the terms of the policy |
Covid - 19 has intensified the war for talent; Employee Benefits were never as important as they are today. Employees want to work for Employers who are considerate, not only towards them, but toward their families, if and when need be. Employers therefore need to look at Employee Deposit Linked Insurance more as an attraction & retention tool than a statutory obligation, and that precisely is the reason why going beyond statutory obligations (especially when the cost incurred is practically the same) seems like too good an idea to let go.
Here's another cracker.
Say, your employee meets with an accident tomorrow, what are all the monies that the Organization would owe the Employee
Well, isn’t that a short list?
What if, for a premium of about ₹ 50 per month you could insure the financial health of the employee's family till he would have retired. That is precisely what a Future Service Gratuity policy insures. The base calculations for the policy are the same as those used for calculation of normal gratuity. Just that, instead of using his tenure as the one you use for calculating gratuity, you use the balance tenure i.e. if the number of years for purpose of gratuity was 10 and the employee had a balance of 15 years of service left for superannuation, the calculation for Future Service Gratuity would be
Future Service Gratuity = Last drawn salary * remaining years of service * 15/26
Buying a future service gratuity therefore ensures that the feeling of gratitude that the policy was meant to generate is not lost in lip service.
Great Customer Service. Very helpful, putting the customer first, caring and handholding throughout the process, every step of the way. Special Shoutout to Mr.Bhanu - who went above and beyond, and exceeded all expectations when it came to processing, filing and fulfilling my claim. Excellent example of great customer service.
Raafi Mohammed
It was a real pleasure interacting with Ethika Insurance team. at the time when I needed them the most. , The way Bhanu helped me out during this crunch and tough period was marvelous, We appreciate your response to our calls not only during office hours but even post office hours. It has helped us immensely. Keep it up!
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Thank you Ethika team for helping me on a cashless claim. Especially I would like to thank Venkat for his extended on call support even during late hours. I also appreciate the way he communicated and fulfilled the commitment of providing the approval in less than hours’ time. Thank you Ethika and team.
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I had a situation with my two kids where they were admitted together at a hospital with dengue fever. The duration to react for insurance approvals was quite short. Both Mr. Rajendra and Mr. Venkat patiently heard out the requirement and helped to process the same quite seamlessly. Special thanks goes to Mr. Venkat who supported thru out the discharge process via WhatsApp on a Sunday till the job is done. I highly recommend Ethika of their services.
Kamesh Mantri
Awesome team, I opted for cashless claim and Venkat from Ethika Cashless department guided me whole time. He was easily accessible and available all the time.My approvals were getting quickly approved which saved my time at the admission & discharge time. Overall great experience. Thank you Ethika and team.
Mandeep pasbola
Appreciate professionalism and good service. Thanks to Bhargava sir who helped me with the insurance process. Response was very quick and I have received the claimed amount in less than 7 working days. Happy with the seamless process.
Kiranashree M S
