What is group term life insurance?

Group term life insurance is a policy that pays a lump sum to the nominee if the employee dies during the policy term, regardless of whether the cause is illness, accident, or natural. Employers buy group term life as part of the benefit stack to provide financial protection to the employee's family, and the death benefit is tax-exempt under the Income Tax Act.

What is group term life insurance?

Group term life insurance is a pure protection product with no maturity benefit or investment component. The employer holds the master policy, and each covered employee is issued a certificate of insurance stating the sum assured. If the employee dies during the policy year, the nominee receives the sum assured as a lump sum. There is no payout if the employee outlives the policy year, similar to individual term life insurance.

What does group term life cover?

Group term life covers death from any cause during the policy year, including natural causes, illness, and accidents. Some policies restrict cover for the first 30 days after enrolment (except accidental death), which is a standard waiting period. Death from suicide is typically excluded for the first 12 months of coverage in line with IRDAI's suicide clause guidelines.

How is the sum assured determined?

The sum assured is set by the employer at policy proposal, usually as a multiple of annual salary or a flat amount per grade. A common structure is 1 to 3 times annual gross salary, with the multiple stepping up for senior grades. Some employers set a flat sum assured of Rs 25 lakh, Rs 50 lakh, or Rs 1 crore per employee, particularly where the workforce has a narrow salary range.

How does group term life differ from EDLI?

The Employees' Deposit Linked Insurance (EDLI) scheme, mandatory under the EPF Act (now consolidated into the Code on Social Security, 2020), provides a death benefit of up to Rs 7 lakh to the nominee of an EPF-covered employee. This is a statutory minimum funded by employer contributions to the EPF. Group term life is a voluntary employer-purchased cover that sits on top of EDLI, offering higher sums assured and often broader coverage terms.

What is the tax treatment of group term life?

The death benefit paid to the nominee under a group term life policy is exempt from tax under Schedule II, clause 2 of the Income Tax Act, 2025 (the recodified Section 10(10D) of the 1961 Act), subject to the premium-to-sum-assured conditions. The employer's premium is deductible as a business expense under Section 37(1), and the employer-paid premium is generally not treated as a taxable perquisite for the employee.

How does the claim process work?

The nominee intimates the insurer of the death within the timeline stated in the policy, typically 60 to 90 days. Required documents include the death certificate, employee ID, nomination form on file with the employer, and, in the case of accidental death, a police FIR and post-mortem report. The insurer is required to decide the claim within 30 days of receiving complete documents. Group term life underwriting is generally simple, with no medical tests required for standard cover, which also makes claim processing faster than individual term life.

How Plum approaches this

Plum structures group term life alongside group health and group personal accident as a coordinated benefit stack, so the employee's family has cover for both income replacement (life) and medical costs (health) without gaps or duplication. Across Plum's group book, claims NPS runs at 79 and cashless pre-authorisation on the health side clears in a median of 45 minutes. Plum places group cover from a minimum of 7 employees, working with partner insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance on the health side, and with specialist life insurers on the group term life component.

Frequently asked questions

Is group term life mandatory for employers?

No. EDLI under the EPF scheme is mandatory, but voluntary group term life on top of that is a business decision.

Can employees increase their group term life cover?

Some policies allow employees to buy voluntary top-up cover funded by employee contributions, in addition to the employer-paid base cover.

Does group term life continue after the employee resigns?

No. Cover typically ends on the employee's last working day, unless the policy offers a portability or conversion option.

Is the nominee required to be a family member?

The nominee can be any person the employee designates, though most employees name a spouse, child, or parent.

Are there medical tests for group term life?

Standard group cover typically does not require medical tests. Higher sum assured tiers, or voluntary top-up cover, may trigger medical underwriting.

Can family members be covered under the employer's group term life policy?

Some policies allow spouse and children cover as an add-on, though this is less common than employee-only cover.