Is Buying Life Insurance Through Your Employer A Good Idea?


Nowadays, a Group Term Insurance plan is a common fringe benefit offered by employers to all their employees. When an employer purchases a term plan for its workers, it acts as an incentive for its employees. But is it a good idea to buy a life insurance plan via your employer? Or should you buy a life insurance plan separately? Let’s find out the answer to this question and many more in this article.

What is Group Term Insurance? 

  • Group term life insurance is a kind of life insurance policy provided to a group under a single policy. The most common group here is a company, and the life assured are its employees.
  • Under this policy, the company’s employees are financially secured by a life insurance company that promises to pay a sum assured to the family members of the employees in case of an unfortunate event such as death, critical illness, etc.
  • Moreover, this life insurance plan also acts as an employee retention instrument, especially for startups.
  • With term life insurance, it does not matter how many people are covered, because the master (which is the company) is the one who upholds the contractual relationship between the employee (who is the policyholder) and the insurance company. It is responsible for choosing the sum assured and the payable premium.
  • It is important to note that a group term life insurance plan can also be taken in addition to your existing individual term plan. This helps you widen your life insurance coverage at an affordable average premium cost and offer more financial stability for your family members in tough times.

Key Features of Group Term Insurance

  1. Highly Affordable: Group term policies are not as expensive as individual term plans. This is because it allows the insurer to club together several kinds of expenses such as operation, administration, and renewal for all the group members under one policy.
  2. Offers Mental Peace: Employees have no financial burden as the employer sponsors the plan. However, some employers may require the employee to take part in the premium by paying a usually very nominal amount.
  3. Common Coverage for All Members: Under this, all the group members are provided with an equal level of coverage irrespective of their income, position, age, or gender. Thus, it enables people with lower economic backgrounds to enjoy coverage at par with higher income groups.

Benefits of Group Term Life Insurance

  1. Extended to Families: Several group insurance plans extend the coverage to include the family members of the employee, including partners, children, and dependent parents.
  2. Affordable for All: Group term life Insurance benefits employees as the premium for the policy is either very minimal or is paid by the employer. So, no stress on the pocket.
  3. Individual Plan Conversion: Most group insurance plans allow group members to convert their scheme into an individual life insurance policy by paying an extra nominal conversion fee.
  4. Easy Entry: Group term plans do not require the employees to undergo any prerequisite conditions like a medical check-up to be eligible for the insurance policy.
  5. Tax Benefits: The employer and the employee enjoy certain tax benefits with a group term life insurance policy. Under Section 10(10D) of the Income Tax Act 1961, death benefit proceeds are exempt from tax. Moreover, the premiums you pay towards your term insurance plan qualify for tax deduction under Section 80C of the Income Tax Act.


Which is Better-Individual Term Insurance or Group Term Life Insurance? 

Now the question arises, which term plan should you buy-an individual plan or a group term plan offered by your employer.

The following pointers will help you make this decision:


Basis Individual Term Plan Group Term Plan
Insurance Coverage In the case of an individual term plan, the coverage is decided by the individual and depends on the amount of premium the life assured can pay. In the case of group term plans, the coverage is the same for all employees and is decided by the employer.
Premium Amount Relatively higher premium. No or low premium.
Entry Requirements Exists like medical checkups, etc. No such requirements.
Policy Continuity As long as the individual wants to stay in the plan subject to the premium payment. Policy gets discontinued when the life assured changes job.


Based on the above pointers, it is easy to conclude that it is worth buying a group term plan from your employer, as it will allow you to get wider insurance coverage at affordable rates.

Term insurance is an important financial net to keep your loved ones financially secured in tough times, especially when you are not around them. Thus, you must buy it after complete understanding and thorough research. However, when you buy group term insurance from your employer, all these things are taken care of by your employer. Besides, providing financial protection, a term plan also provides you immense peace of mind as you know that if something unfortunate happens tomorrow, you have enough financial resources for them to maintain their financial stability.