In today’s era of competitive recruitment, it has become necessary for employers to offer a wide range of fringe benefits to their employees. One of the most common and popular options among these additional benefits is Group Term Insurance. Nowadays, group term plans have become almost a default non-monetary benefit employers provide. But as an employee, should we rely on the group plan for a life cover? Or should we supplement it with an individual term policy? Let’s find out.
What is Group Term Insurance?
As the name suggests, a group term plan is an insurance cover meant to provide coverage to a group. Group term life insurance is generally provided by employers to their employees for various reasons. Firstly, it helps them provide their employees with a life cover that keeps them and their loved ones financially secure during an untimely death of the employee. Some group term life insurance plans also provide coverage if the employee gets a disability or critical illness.
Secondly, employers provide these group plans to boost their employees’ motivation levels and make them feel they belong to the organisation. This, in turn, helps increase their productivity levels and lower attrition rates. Employers can choose to contribute either the entire premium of these plans or bear it jointly with the employees.
What is Personal Term Insurance?
Personal term insurance offers the same financial coverage as a group term plan, however, instead of a group, it only covers an Individual. Moreover, unlike a group term plan where we as employees may or may not need to pay the premium, we need to pay the premium for a personal term plan ourselves.
There are various personal term plans to choose from, namely Term Plan With Return of Premium (TROP), Level Term Plans, Increasing Term Plans, Decreasing Term Plans, and Convertible Term Plans. We can further enhance the coverage of personal term plans with the help of insurance riders.
Benefits of Having Personal Term Plan With Group Term Insurance
Below, we have mentioned the key benefits which can be enjoyed by supplementing the coverage of a group term life insurance plan with an individual term life policy –
- Enhanced Coverage – The primary benefit that we can enjoy by getting a personal term plan with a group term plan is enhanced life cover. This helps the policyholder’s family remain financially stable with the availability of sufficient funds in case the life assured passes away in an unfortunate event, gets a disability, or suffers from a critical illness.
- Customisation Benefits – A group term plan is taken by an employer who acts as the master of the plan, deciding all terms and conditions. Thus, for employees, there is no room for customisation. If we want a customised life insurance plan, then we must also opt for a personal term insurance policy along with our group policy.
- Keeps Cover Intact Even During Job Change – The coverage offered by a group term plan remains valid only as long as we remain employed with the organisation. Thus, to ensure life insurance coverage, even during times of job change or unemployment, we must choose to get an individual term plan.
- Tax Benefits – Premiums paid towards a life insurance plan qualify for a tax deduction under Section 80C of the Income Tax Act for up to Rs. 1.5 Lakh. Thus, to reap these tax deduction benefits, we must get an individual term plan and a group term plan.
Do I Need a Personal Life Insurance Plan With a Group Policy?
The answer to this question depends on one’s financial requirements and preferences for life cover. For those of us, who have a family dependent on them financially, it is wise to supplement the life cover offered by a group term plan with a personal term plan. This can help us ensure that our family’s financial stability remains intact in times of grief.
The coverage offered by both the personal and group term plan will help our loved ones fulfil their dreams, such as higher education, marriage, or setting up a business, without compromising due to financial constraints.
Moreover, it is a good idea to get a personal term plan in addition to the group term plan for those of us who want to customise our term plan or want to remain financially covered against life risks during job changes.
Those of us, who are not the sole bread earners or those who do not have other people financially dependent on them, can choose to rely on the group term plan offered by our employer for life insurance coverage requirements and save the premium amount to use it somewhere else.
Almost all employees today have a Group Term Insurance provided by their company. And this, we often land up in the dilemma of whether we should get a personal term plan with this group coverage or not. But, we must encounter this financial decision early in life to keep our loved ones financially secure in our absence right from the very beginning. Moreover, we need to keep enhancing our life insurance coverage with time as we move to different life stages where we can have more financial dependents on us.