Should an employer offer group life insurance in addition to group health?

An employer should usually offer group term life insurance in addition to group health insurance, because the two cover different risks and group term life is inexpensive relative to the protection it provides. Group health insurance pays for hospitalisation during an employee’s lifetime, while group term life pays a lump sum to the nominee if the employee dies. Together they cover both medical cost and income loss on death.

Why isn’t group health insurance enough on its own?

Group health insurance does not pay anything if an employee dies, which is the gap group term life fills. A health policy reimburses or settles hospital bills on a cashless basis, but it provides no support to the family once the employee is gone. If an employee with dependents dies, whether from illness, accident, or any other cause, the household loses its income and may carry loans, rent, and education costs. Group term life converts that exposure into a defined payout to the nominee, which is why most structured benefit programmes pair the two covers.

How much does group term life add to the benefit budget?

Group term life is one of the cheapest benefits per unit of cover, because the risk is pooled across the whole workforce and the policy is pure protection with no savings component. A young, office-based workforce typically attracts low per-employee premiums for a sum assured set at two to three times annual salary. The marginal cost of adding group term life to an existing group health programme is small compared with the financial protection it provides, which makes it a high-value addition rather than a major budget line.

What does group term life cover that group health does not?

Group term life covers death during service and pays a fixed sum assured to the nominee, a risk no health policy addresses. Health insurance covers in-patient treatment, day-care procedures, and certain pre- and post-hospitalisation costs. Group term life covers the financial consequence of losing the employee entirely. Employers can extend the protection with riders such as accidental death benefit, terminal illness, and permanent disability, which broaden the cover beyond natural death.

What are the tax and GST implications of adding group term life?

The group term life premium is a deductible business expense for the employer and is generally not a taxable perquisite for the employee. Under Section 37(1) the employer deducts the premium, and under Section 17(2) the cover is not added to the employee’s salary income, since it is a group scheme not assigned individually. The death benefit is exempt for the nominee under Section 10(10D). Group term life premiums attract 18% GST, the same rate that applies to group health, as the September 2025 GST exemption covers only individual policies.

When might an employer hold off on group term life?

An employer with a very small or seasonal workforce, or one still establishing its group health cover, may sequence group term life later. Setting up group health first addresses the most frequently used benefit, since hospitalisation claims occur far more often than death claims. A company can add group term life at renewal once the health programme is stable, or bundle both from the start to give employees complete protection in one onboarding.

How Plum approaches this

Plum sets up group health and group term life cover for companies with a minimum of 7 employees, against the common assumption that a group needs only 2 or 3 members. The claims experience is measured: Plum holds a claims NPS of 79 and a median pre-authorisation turnaround of 45 minutes, well inside the one-hour cashless pre-authorisation window set by the IRDAI Master Circular of May 2024. Cashless access depends on the insurer underwriting the policy, so the hospital network varies; Plum places cover with insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance, and matches the network to where a company’s employees actually live and work.

Frequently asked questions

Can an employer buy group health and group term life from one provider? Yes. Many employers source both through a single benefits platform that places each cover with an appropriate insurer and manages enrolment and claims together.

Is group term life mandatory in India? No. Group term life is a voluntary benefit. Statutory life cover for lower-wage employees historically ran through EDLI under provident fund rules.

How is the group term life sum assured usually set? Commonly as a flat amount, a multiple of salary, or a graded structure tied to grade or designation.