A guide for founders & HR teams
Group term life insurance: the cover a family never forgets — funded by money you already spend.
Last reviewed:
One company policy that pays a family a lump sum if an employee dies in service — funded by you, handled in one place, and built around the EDLI contribution you already pay.
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Licensed direct broker · Red Carpet: 15,000+ claims handled
What is group term life insurance?
Group term life insurance is a single policy a company takes for its whole team that pays a fixed lump sum to an employee’s family if that employee dies while they’re covered. One master policy, one renewal, everyone protected from day one — no individual paperwork, no medical tests for most.
You’ll see it written several ways, and they all mean the same thing: Group Term Life Insurance (GTLI), Group Term Life (GTL), group term insurance, group life insurance, or group life assurance. “Term” simply means it’s pure protection for a set period (your policy year, renewed each year) — there’s no savings or maturity payout, which is exactly why the cover per employee is large for a small premium.
It sits alongside your group health policy but does a different job. Health insurance pays hospital bills while someone is alive and being treated. Group term life pays the family a lump sum if the worst happens. Most companies that care about their people carry both.
The idea most companies miss
If you run PF, you’re already funding a basic life cover — EDLI — but it’s capped low and the family deals with a government office. The law lets you redirect that same budget into a larger, salary-linked policy with a real claims team. Same money, a far better benefit. (How? See EDLI exemption.)
Why offer group term life — the promise that outlasts employment
A salary supports a family every month — until, suddenly, it can’t. Group term life is the one benefit that keeps that support going at the single hardest moment a family will face. It’s not a perk people use often; it’s the one they never forget you offered.
For the company, the mechanics are simple and the signal is large. A modest premium converts into cover worth several years of an employee’s salary for their family. It tells your team — and the people deciding whether to join you — exactly what kind of employer you are: one that has thought about their family, not just their output.
We won’t dress this up as a loyalty trick. It’s a statement of care, and people read it as one.
Group term life vs an individual term policy
Both pay a family if the policyholder dies. The difference is who arranges it, what it costs, and who can get in.
The short version: a group policy gives day-one cover and gets everyone in, where an individual policy is underwritten one person at a time.
| Group term life | Individual term policy | |
|---|---|---|
| Medical tests | None up to the Free Cover Limit | Usually required, and more so with age |
| When cover starts | Day one for everyone on the policy | After underwriting, which can take time |
| Who can get in | Everyone on the team, including people who’d struggle to buy their own | Subject to health, age and lifestyle checks |
| Who pays | The employer — it costs the employee nothing | The individual |
| Cost per person | Lower — priced for the whole group | Higher — priced individually |
| If you leave | Cover ends, though some plans allow a switch to an individual policy | Stays with you — it’s yours to keep |
| Best for | Protecting a whole team from day one | Extra personal cover, or the self-employed |
The honest caveat: group cover is tied to the job. The day someone leaves, their cover under it stops — which is why we tell employees a company policy is a strong base, not a reason to skip a personal policy of their own. Many group plans do let a leaver convert their cover or top it up.
What a group term life policy covers
The core cover is straightforward: the full sum insured is paid to the nominee on the death of the employee, whether the cause is natural or accidental. Around that core, a few additions turn a basic policy into a proper safety net.
Death cover (natural & accidental)
The full amount, paid as a lump sum to the family.
A Free Cover Limit
A level up to which cover is granted with no medical tests — most of your team is covered instantly.
Riders you can add
Widen the net: accidental death benefit, permanent total or partial disability, critical illness, and a daily hospital cash benefit. You choose which fit your team.
Suicide covered from day one
A standard individual term policy makes a family wait twelve months before death by suicide is covered. A group policy can often waive that wait, so cover applies from day one — a quiet but important piece of mental-health support.
Worldwide, round the clock
Cover applies wherever and whenever, not only on duty or only in India.
EDLI, explained — and how group term life relates to it
EDLI stands for Employees’ Deposit Linked Insurance. It’s a life-cover scheme that runs automatically alongside EPF (provident fund). If an employee who is an active EPF member dies while in service, their family receives a lump sum — funded by a small contribution the employer already pays. In other words: if you run PF, you’re already paying for a basic group life benefit. Most companies just don’t realise it, or how limited it is.
How EDLI works, in plain terms
Every month, on top of PF, the employer pays a small percentage of wages into EDLI. There’s no separate cost to the employee. If a member dies in service, the family claims a one-time amount calculated from the employee’s recent wages, plus a bonus — up to a government-set maximum.
EDLI as it stands today
Verified against current EPFO sources, June 2026 — unchanged since the April 2021 notification.
- Wage ceiling used for the sum: ₹15,000 per month
- Maximum benefit to the family: ₹7,00,000
- Minimum benefit: ₹2,50,000
- Employer contribution: 0.5% of wages, up to about ₹75 per employee per month
- How the sum is built: 35 × average monthly wages (capped) + a bonus of up to ₹1,75,000
- Worked example: 35 × ₹15,000 + ₹1,75,000 = ₹7,00,000 (the maximum)
Recent changes folded in: from July 2025, families of members with under a year’s service receive at least ₹50,000, and cover now continues for up to six months of a contribution gap.
Figures per EPFO under the EPF & MP Act, 1952.Where EDLI falls short — and where group term life comes in. EDLI is a floor, not a plan. The benefit is capped low, it’s tied to a wage ceiling that hasn’t kept pace with real salaries, and the family deals with the PF office, not a person. A group term life policy fixes all three: the cover can be a meaningful multiple of actual salary, it’s not bound by the EDLI ceiling, and a real claims team stands with the family. The next section explains how you can redirect the money you already spend on EDLI into exactly this.
EDLI exemption — turning a mandatory cost into a real benefit
The law lets a company step out of the government’s EDLI scheme on one condition: you run a group term life policy that gives employees better benefits than EDLI would. With the PF commissioner’s approval, your mandatory EDLI contribution stops, and that budget funds a far larger life cover instead. The compliance box still gets ticked — your people just get a real benefit for the same money.
How it works:
- Put the better policy in place. Run a group term life policy with benefits at least equal to — ideally well above — EDLI. A salary-linked cover clears this easily.
- Tell your team. Give employees notice that you’re moving to a group term life scheme in lieu of EDLI, and record their consent.
- Apply under Section 17(2A). Apply to your Regional PF Commissioner to exempt the whole company from the EDLI scheme. The exemption applies from the first of the month you apply.
- Submit the paperwork. The group policy, a side-by-side comparison showing your benefits beat EDLI, advance premium receipts, proof of employee consent, and an employer declaration. (EPFO refreshed this application format in late 2025.)
- Switch over. On approval, EDLI contributions stop — you pay only a small inspection charge — and any future death claim is settled by the insurer, so HR deals with one entity, not the PF office.
Honest caveat: the exemption needs EPFO’s approval (it isn’t automatic), the policy must stay better than EDLI, and the exemption is reviewed and renewed.
This is the single most useful move most companies haven’t made — a mandatory cost quietly converted into a benefit employees actually value, often for little or no extra spend. (See the comparison tool below.)
What does it actually cost? In many cases the EDLI budget you stop paying covers most or all of a basic salary-linked policy, and richer cover or riders cost a little above that — we’ll show you the exact figures for your team.
See it for your team: the EDLI-to-cover calculator
You already pay into EDLI for every employee. This shows, roughly, what redirecting that same budget into a proper group term life cover could look like — an illustrative planning estimate, never a quote.
Illustrative estimate — not a quote
Your team
The EPF-wage part of pay (basic + DA) — used to work out your EDLI contribution.
Commonly around 5× annual CTC — your call.
Your illustration
Net annual cost
₹1,35,000
After redirecting your EDLI contribution, this is roughly what the upgraded cover would cost a year — for 100 employees at ₹30,00,000 of cover each.
20 minutes with a Growth Advisor. No obligation.
Illustrative only. EDLI is 0.5% of wages capped at ₹75 per employee a month; group term life is illustrated at ₹75 per ₹1 lakh of cover a year. Real premiums depend on your team’s ages, the cover chosen and claims experience, and are confirmed by the insurer. Figures exclude GST.
Future Service Gratuity (FSG) — securing the years they didn’t get to work
Gratuity normally rewards the years an employee has already worked. Future Service Gratuity does the opposite: it pays the family the gratuity the employee would have earned had they worked all the way to retirement. It’s funded through a group term life policy, and it turns a standard end-of-service payment into a promise that covers a whole career — even one cut short.
Why it matters: when someone dies young, their family loses not just a salary but every future benefit that service would have built. Standard gratuity, based only on years served so far, is small for a young employee. FSG closes that gap by valuing the full intended tenure. For the company it’s a modest add-on; for a grieving family it can be the difference between coping and crisis.
It’s the advanced version of the same idea: a small, well-designed premium standing in for years of lost income.
EDLI vs group term life vs FSG, side by side
In one line: EDLI is the statutory floor; group term life is the plan that replaces it; FSG extends that plan across a whole career.
| EDLI | Group Term Life (GTL) | Future Service Gratuity (FSG) | |
|---|---|---|---|
| What it is | A basic life cover that runs automatically with PF | A company policy paying the family a lump sum on death | Gratuity for the years an employee would have worked to retirement, funded via GTL |
| Mandatory? | Yes — automatic if you run PF | No — voluntary, and can replace EDLI | No — voluntary add-on |
| Who pays | Employer (a small % of wages) | Employer | Employer |
| How much cover | Capped and low — up to the EDLI maximum | A meaningful multiple of actual salary — your choice | A full career’s worth of gratuity |
| Medical tests | None | None up to the Free Cover Limit | None |
| Who handles the claim | The PF office | A real claims team (Red Carpet) | Same as GTL |
| Tax | Part of PF — no separate step | Premium deductible; payout tax-free under 10(10D) | Treated like GTL |
| Think of it as | The floor | The plan | The plan, extended to a whole career |
How the cover amount is decided
There are two common ways to set how much each employee is covered for, and you can mix them.
- A flat sum — the same cover for everyone (simple, equal, easy to explain).
- A multiple of salary — for example a few times annual salary or CTC, so cover scales with what a family would actually lose. You can set different multiples by grade.
Two things worth designing in. First, the Free Cover Limit: the level up to which no medical tests are needed — set sensibly, almost your whole team is covered instantly. Second, a minimum floor so that junior employees still receive a genuinely meaningful amount, not a token sum. A fair policy protects the newest joiner as seriously as the senior leader.
We keep rupee amounts off this page on purpose — the right number for your team is something we work out with you, not a figure to guess from a website.
How a group term life claim works
A death claim is the moment everything else on this page is really for. Done right, the family deals with one person who handles the paperwork, chases the insurer, and gets the lump sum to them quickly. Done badly, a grieving family is left filling forms and waiting on a call centre. Which of those happens is mostly decided long before the claim — by how the policy was set up.
The three things that make a claim smooth:
- Nominee declarations collected up front, in writing, at onboarding — the single most important step. Without a clear nominee, even a valid claim drags.
- Clean records — accurate member data so there’s nothing to dispute.
- A real claims team — under our Red Carpet promise, the family gets a single advocate, not a queue.
This is also where a broker earns their place. We’ve stood with families through these claims, and we’ll fight a claim as far as the policy’s own words allow. We won’t promise an outcome no one can promise — but we can promise the family won’t face it alone.
Under Red Carpet, the family gets a real person from our team who stays with them until the claim is settled — not a portal or a helpline queue. Behind that person sit specialist teams, so the help is fast and never depends on one individual. Red Carpet: 15,000+ claims handled.
Want the whole picture of how claims work? See Protect →
Featured claim story · past experience
When a high-performing employee at a client company died suddenly of a heart attack, the team was in shock. Inside that, the group term life policy did the one thing it was built to do: a payout of around ₹3 crore reached the family when they needed it most. Their HR leader put it simply — being able to provide care at that level showed the company’s values in a way words never could.
A real claim; past experience. Outcomes vary by policy and case.Group term life for startups and small teams
You don’t need to be large to offer this. A proper group term life policy can be set up for a small team — commonly from around 10 lives, and sometimes fewer.
For a startup, the case is strong and the cost is small. It’s one of the cheapest ways to look — and be — a serious employer when you’re competing with bigger names for the same people. And because group cover skips the medical tests and waiting periods of individual policies, your whole team is protected from day one without any of them lifting a finger.
Is group term life insurance tax-deductible?
For most companies, yes — and the family benefits too.
- For the employer: premiums paid for a group term life policy are generally treated as a tax-deductible business expense.
- For the family: the lump sum received on death is generally tax-exempt in the family’s hands under Section 10(10D) of the Income Tax Act.
So the cover reaches the family in full, and the company’s cost is offset against tax. We’ll always point you to your auditor for the specifics of your books — this is the general picture, not personalised tax advice.
Setting up and running group term life
Buying the policy is the easy part. These are the five administrative steps we run with you so the cover actually works when it’s needed.
- Secure nominee declarations. Collect nominee details in writing from every employee at onboarding. This is the single most important step for a fast, clean claim.
- Manage the ‘actively at work’ clause. At policy start, declare anyone on sick or extended leave; their cover begins the day they return to work, keeping everything compliant.
- Oversee Free Cover Limit underwriting. Identify anyone whose sum insured is above the Free Cover Limit and run the short medical process so they get their full intended cover.
- Maintain an advance premium deposit. Hold a small deposit with the insurer so new joiners are covered from day one, with no gap as the team grows.
- Champion the benefit internally. A benefit no one understands is a benefit half-wasted. We give you plain-language templates so your team knows what they have and what it’s worth.
Why work with an insurance broker
An insurance broker works for you, not for an insurer. That changes what you get.
- Insurer-agnostic placement. We compare across insurers for your team rather than selling one company’s product, so the design and the rate are driven by your needs.
- The EDLI exemption, handled. The superior-benefit comparison, the documentation, the application to the PF commissioner — we run all of it.
- Negotiation that continues at renewal, not just at sign-up — so terms don’t quietly drift against you.
- A claims team behind the family, which is the part of this that actually matters.
We’re a licensed direct broker, and we’ll give you a straight read on what’s realistic for your group — including when something isn’t.
Common myths about group term life
A few of the ones we end up correcting most often.
- Myth“Group term life is just the same as EDLI.”FactEDLI is a small, capped statutory floor; group term life is a salary-linked policy you design and control, usually for far more cover. Many companies replace EDLI with it.
- Myth“Suicide isn’t covered.”FactIndividual policies make a family wait twelve months; a group policy can often waive that, so cover applies from day one.
- Myth“You need 20+ employees.”FactA policy can commonly start from around 10 lives, sometimes fewer.
- Myth“It’s legally mandatory.”FactFor most private companies, offering group term life is a choice. EDLI (via PF) is the statutory piece; group term life is the upgrade.
- Myth“An individual policy is always better.”FactGroup cover gives day-one protection, no medical tests for most, and includes people who couldn’t easily buy their own — though it ends when employment does.
- Myth“The cheapest quote is the best deal.”FactThe insurer’s claim record and the claims support behind the policy matter more than the headline premium.
Key terms, explained
Group term life comes with its own vocabulary. Here’s the plain-English version of the words you’ll meet.
- EDLI (Employees’ Deposit Linked Insurance)
- A statutory life-cover scheme that runs with EPF; pays a capped lump sum to the family if an active member dies in service.
- EDLI exemption
- Opting out of the government EDLI scheme by running a group term life policy with superior benefits, approved by the PF commissioner.
- Group Term Life (GTL / GTLI)
- One policy covering a whole team, paying a lump sum to a family on an employee’s death; pure protection, no savings element.
- Future Service Gratuity (FSG)
- Gratuity for the years an employee would have served to retirement, funded via a group term life policy.
- Sum insured / sum assured
- The amount paid to the family; can be flat or a multiple of salary.
- Free Cover Limit (FCL)
- The level up to which cover is granted with no medical tests.
- Actively-at-work clause
- Cover for a member starts only once they are actively at work, not on extended leave, at policy start or joining.
- Nominee
- The person the employee names to receive the payout.
- Rider
- An optional add-on (e.g. disability, critical illness, hospital cash) that widens cover.
- Accidental death benefit
- An extra amount paid if death is by accident.
- Permanent total / partial disability
- Rider cover for life-changing disability, not only death.
- Section 10(10D)
- The Income Tax provision under which a death benefit is generally tax-exempt for the family.
- Section 17(2A) / EDLI exemption route
- The provision allowing an employer to be exempted from EDLI with a superior scheme.
- Wage ceiling
- The salary cap used to calculate the EDLI benefit.
Common questions
The questions founders and HR teams ask us most — many of them about EDLI.
What is EDLI?
What is the EDLI full form?
What is the GTL / GTLI full form?
How is EDLI calculated?
Who is eligible for the EDLI benefit?
How does a family claim EDLI?
What is the EDLI contribution?
What’s the difference between group term life and EDLI?
Is group term life insurance taxable?
What is the ‘actively at work’ clause?
Are pre-existing conditions covered?
Is suicide covered?
What is the Free Cover Limit?
What happens to my cover when I leave?
What is Future Service Gratuity?
How do we get an EDLI exemption?
What’s the minimum team size?
Does this replace our group health policy?
Go deeper: plain-English explainers
Longer reads on group term life — written to be useful on their own. Still general; where the honest answer is “it depends on your policy,” they say so.
The right policy is a conversation, not a quote
There’s no single “best” group term life policy — there’s the right one for your team, your budget and what you’re trying to say to your people. The fastest way to find it is a short conversation, not a form full of guesses.
What happens when you talk to us
A 20-minute video call with a Growth Advisor — no obligation, and no quote pushed. It opens with a five-minute video from our founder on how the benefits stack works and why Ethika exists; the rest is your questions. You’ll leave with an honest read on your current cover and claims experience, and a straight answer on whether we can genuinely help — even if you never become a client.
20 minutes with a Growth Advisor. No obligation.
Putting a full benefits package together?
A note on this page. This page is general information about group term life insurance, not insurance, legal, financial or tax advice, and nothing on it is an offer of cover. The right policy for your organisation is determined through a conversation and the formal mandate process.
Sources. EDLI figures and scheme rules: EPFO, under the EPF & MP Act, 1952 (current as of June 2026). EDLI exemption route: Section 17(2A); EPFO application format updated late 2025. Tax treatment: Income Tax Act, Section 10(10D).