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Is Group Term Life Insurance Provided By Employer Sufficient?

Group term life insurance policy is provided by the employer, but it has a lot of pros and cons which you should be aware. Read on to know more about it.

  • 6,514 Views | Updated on: Feb 26, 2024

Group term insurance policy is usually the policy that offers life insurance cover to a group of people. Companies normally subscribe to it to offer insurance protection to their employees. It is one of the perquisites offered today by big companies to hire and retain talent. It aims to protect the employee’s family from financial burdens in case of his/her untimely death. Immediate family members (beneficiaries) are given the amount insured after the policyholder’s death.

The question has been long debated - if you are getting a group term insurance by employer, do you really need another life insurance policy. Let us look at a few points of discussion on the same.

One size does not fit all

The company will offer the same insurance policy to all its employees. Even if the features slightly differ based on your designation and salary slabs, the basics of the policy given stay the same. The main purpose of a life insurance is to ensure that it meets your family’s financial needs after you. The insurance provided by employer may be good but it may not be the best one for you. For example, if the company is giving you an insurance cover of INR 25 lakh, it may not be enough for you if you have multiple dependents and other financial liabilities. If that is the only policy you have, the money given may not be enough for your family, if something happens to you and they may face a financial crisis. In such cases, it makes sense to have another life insurance policy that covers you for a larger sum.

Age limit

The insurance provided by employer may have a specific term limit. Once you reach the term, the policy may expire. If you switch your job or retire, the policy won’t be valid for you. This will leave you uninsured. You will also have to go through the hassle of getting insurance on your own and the premium may be higher (compared to what it would be if you apply for it at a younger age). Getting insurance when you are older also comes with a lot of terms and conditions, which may not necessarily be in your favor.

Coverage can end without a prior warning

Group term insurance by employer usually is renewed every year. In case there is a change in the management or if the board of directors suddenly decides that they no longer want to insure their employees, they can conveniently cancel off your insurance without warning. This can leave you unprotected and vulnerable to financial liabilities. If you have another plan covering you, the termination of the insurance by your employer will not be that big a hassle.

Group term insurance cannot be converted to an individual policy

One of the main negatives of the insurance provided by employer is that it is sacrosanct. You cannot increase the coverage amount. In case you leave the company, you cannot convert the company policy into your own individual insurance policy. The terms and conditions of the group life insurance policy are decided by the employer and the insurance provider. You cannot customize the policy by adding on optional riders. You have to be fine with whatever the insurance provider offers you, as selected by your employer.

Life insurance is very subjective. It needs to cater to your personal requirements. Group life insurance policy provided by your employer may not be the best for you and your family. While it has its own set of benefits like some back up in case of an emergency and no premium to be paid, it is not enough and you must not rely on it alone.

However, having said the aforementioned points, there are some attractive group insurance plans launched to help large organizations meet the increasing needs of their employees. For instance, some leading insurance companies offer the following benefits in their group insurance plans:

  • Life cover of INR 1 crore for less than INR 19 per day
  • No need of a medical test for life cover up to INR 1 crore
  • Tax savings
  • The benefit of optional critical illness
  • 10 times CTC cover for a period of 10 years

Therefore, you must keep all the pros and cons of a group insurance term plan in mind before depending on it completely. If the group insurance plan is providing the above-mentioned benefits, you can avail of it. However, you must also have an individual life insurance plan as a strong backup option if any untoward incident were to occur.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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