Finance

Is a group term insurance enough for you and your family?

As a salaried employee, your main objective will be to utilise your income in a way that would create a financial safety net for your loved ones in your absence. One way of ensuring this is through investments in financial products which will allow you to grow your wealth and enjoy the returns to secure your and your family’s future.

An extra layer of safety can be added by going for term life insurance, which would provide financial assistance to your family in your absence. Your employer may usually cover you with a group term insurance policy. However, is a single policy coverage enough for you and your family to be protected against life risks? Read more to find out.

What is a group term insurance?

In simple terms, a group term insurance is a type of term insurance provided by an employer to their employees. This policy provides you with financial assistance during any emergencies and mishaps. In this policy, the coverage limit is fixed. However, many employers do allow you to increase the coverage amount of your policy. The premium for this increase in coverage is deducted from your salary. Along with the increased coverage, many employers provide you with the option of including your spouse and children or your parents. This, however, varies from employer to employer.

Who is covered under the policy?

The following are covered under group term insurance:

  1. Groups of employer and employees
  2. Group of employees in a bank
  3. Groups of non-employer and non-employees
  4. Group of employees belonging to NGOs
  5. Group of people belonging to NBFCs

What is offered under the policy?

As mentioned earlier, many employers allow you the option of increasing the coverage amount offered under the policy. Generally, the premium is covered by the employer only. However, if you increase the coverage, its premium is paid from your salary. Also, employers allow you to include your spouse and children under the coverage of the policy. Many employers also allow you to include your parents under the policy’s coverage. Riders such as accidental death benefit and critical illness benefit are pre-included in the policy to enhance its coverage.

Should you stick with just one policy?

While the group term insurance policy offered to you by your employer might seem sufficient to you in the beginning, as you approach different life stages, your financial requirements would change and so would your dependency on the insurance policy. The coverage that is provided under the policy might not be sufficient after a certain point. However, if you opt for a higher coverage, the premium for it will be deducted from your income, meaning that you will be taking home lower salary.

The amount might not match your life goals or the financial security requirement of your family. Not to mention the fact that this policy covers you as long as you are associated with that employer. Once you leave the job, the policy coverage ceases to exist, and you and your loved ones would be vulnerable in the event of an emergency.

What should you do?

It is advised never to stick with a single policy when it comes to securing the financial future of your loved ones. This can be done by investing in a good term life insurance apart from your existing group term insurance policy offered by your employer. You can select the term insurance as per your financial requirements and the life goals you want to fulfil.

As you are aware, term insurance plans come with a specified time limit for the coverage they offer. The compensation is provided to your dependents if you were to pass away during the policy term, with there being no maturity benefits if you were to survive the term of the policy.

However, there is an option of term insurance with return of premium. These plans are known as return of premium term plans, in which your premium is paid back to you once the policy matures and you have survived the policy term. You can also enjoy tax benefits on the premium and sum assured of the policy.

Conclusion

While it might seem better to stick with your employer’s policy, it would benefit you and your dependents by having an extra layer of financial coverage with a personal term insurance. You can use the term insurance premium calculator to see how much your policy will cost you.

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