Group-term insurance is usually provided by an employer to their employees. While a few group insurance policies provide coverage just for the employee, others cover the employee’s spouse, kids, and parents.
Suppose you have group term insurance coverage as part of your employee benefits. In that case, you must understand it thoroughly and determine whether the coverage provided by your employer is sufficient for you and your family. Here’s learning more about this kind of term plan.
What do we understand by Group Term Insurance?
As the name says, a group term insurance is provided to a group by an administrator. This is one of the company’s most common insurance coverage options for its employees. There is usually no extra cost to be paid by the employee as it may come as a part of the benefits package from the employer. However, employees can pay an additional premium to obtain a higher sum assured or cover their spouse under the same plan.
How Does Group Term Insurance Work?
Before we learn about the benefits, let us see how a group term plan works:
- A group that is to be insured is identified; in this case, it is the employees
- The group administrator is picked, and it is the employer here
- The employer obtains the master policy for which an initial premium is paid. The payment is valid for 1 year.
- Every member in the group then obtains coverage for an assured sum, as per the suitable plan picked by the employer
- The premium to be paid depends on the number of employees, the plan chosen, and the coverage provided to them
Is the group term insurance sufficient for you and your family?
This is one question that has been debated for quite a long time. If you already have group term insurance provided to you by your employer, do you still need to take another term insurance policy? The simple answer is yes, and there are multiple reasons for this.
Let us discuss this in detail.
What is suitable for someone might not be suitable for you
When a company provides you with group term insurance, the plan, the sum assured, and the coverage is the same for other employees. Although, in some cases, the features might change based on your salary bracket and your designation.
Though the policy provided might be the best, it might not meet your and your family’s financial needs. If you have more dependents or a lot of financial liability, it helps to take another insurance policy that provides coverage for a larger amount. One also needs to check the term plan tax benefits before choosing one. Term insurance premiums come with deductions under Section 80C of the Income Tax Act of 1961, up to Rs. 1,50,000 per year. You can only avail of these benefits in the case of an individual policy.
Consider the term limit and your age too
. The insurance isn’t valid when you switch jobs or leave the present job. You may then be left without a life cover. Also, when you quit your job in your old age, getting an insurance policy on your own can be both expensive as well as a hassle.
The policy coverage can end at any time without any warning
The group term insurance needs to be renewed every year by the employer. While the company ensures there are no errors, there can be some situations to keep in mind. For example, when there is a change in the company policy, they might not want to provide insurance for the staff anymore. This can suddenly leave you uninsured. Getting an insurance policy all of a sudden can be a hassle, and as it is unplanned, the cost might seem like a burden.
You can never convert a group policy into an individual one
One of the major downsides of a group term plan is that you cannot change the coverage amount, and you cannot change the policy into an individual one after leaving the company. You also cannot customize the insurance policy and must be content with what is provided.
Though the group term insurance policies are a good addition, the benefits of an individual term plan make it a must-have for your portfolio. Some of the benefits offered by insurance companies are:
- Life cover (vary based on the employer )
- No prior medical test required
- It helps with saving tax
- Additional benefits for critical illnesses and a lot more
Now that we learned about both the pros and cons of group term insurance plans, it is time that you decide if it is sufficient for you and your family. Experts always suggest having an additional insurance plan as a backup. In addition, there might be sudden situations when you can avail of these insurance policies. So, think wisely, and plan ahead to lead a stress-free life.