Does Group Term Life Insurance Expire if You Leave Your Job?
Every employee is eligible to get insurance from their employer upon employment. Employers are responsible for the safety and injury coverage of their employees while at work. In general cases, a group term life insurance policy is the one in which employees are covered by default. While you will be insured throughout the duration of your employment, you will be forced to leave your insurance behind when you leave your job. This is one of the most significant disadvantages of a life insurance policy after employment.
What is Group Term Life Insurance?
A group term life policy is an insurance scheme you are added to by default when you are employed in a company. It is a life insurance policy covering all individuals coming under a common employer. The company pays the entire premium as a compensation package for their employees’ well-being. Just like other individual life insurance policies, a group term policy has several benefits.
What Happens to the Insurance Policy When You Leave the Job?
While getting insurance coverage for free might sound good, there is one point to consider. You might need to leave behind the benefits once you leave the job. If you have a contract job, your insurance policy will only serve you for the time of your contract with the company. In most cases, the employer who bought the insurance policy is the one providing benefits to the employees under him. This means that even if you don’t leave the company, you might lose your insurance coverage upon transferring to another department.
What are the Benefits of a Group Term Life Policy?
Plum Insurance’s group term life insurance policy for employers offers several perks. Employees can enjoy the following benefits from this term insurance policy:
- Coverage Benefits: A group term insurance policy has similar benefits to any individual term insurance policy. It covers the financial depression due to the demise of an active earning member. It can disburse 100% of the insured amount to the nominee or family members of the deceased employee upon death while on duty.
Apart from death benefits, there can be other benefits with certain optional add-ons under the same policy. The add-ons can come under the categories of coverage for partial disability, accidental injuries, and chronic illnesses.
- Subsidized Premiums: As a part of the salary structure, a very small amount of the insurance premium is cut off along with other provisions from the employing company. In some companies, the employer can choose to pay the entire premium themselves. While in some cases, the employee has to pay a small amount (say 20%) of the monthly premium of a term life insurance policy. But this subsidy does not interfere with the policy’s term benefits. Therefore, you get more by paying less.
- Less Paperwork: Generally, employers have to go through mounts of paperwork while buying an insurance package. The employees merely have to fill up the required forms, write out a nominee name, and produce supporting documents to get their insurance during the recruitment process. This can be made easy by uploading relevant documents and details in the employees’ company profile logs.
- Gratuity Benefits: The group insurance policy can fetch an employee certain gratuity benefits after working for an extended period (say five years) under the same employer. This is possible only after you work for a certain period of time in a company. Gratuity benefits can be a lump sum of insurance money that you can retrieve when you leave the job. You are even liable to claim the amount in case of an emergency.
- Tax Benefits: Employees will be able to claim tax deduction benefits even if the insurance policy is being provided by the employer. Tax deductions can be claimed under Section 80C of the Income Tax Act only by an insured individual. Here, the employee can either be a resident or non-resident of India. The maximum deduction that can be claimed under this section as per life insurance premium is up to ₹1,50,000 for a year. The employee is eligible to opt for a separate life insurance policy for themselves or their spouse and children.
- Portable Coverage: As discussed above, in most cases, employees are subject to insurance benefits only for the tenure of their services. If they opt to leave the job voluntarily, they have to leave behind their insurance benefits or let them lapse. With Plum Insurance’s group term life policy, your employers have the option of providing you portability on the insurance coverage. You can opt for a transfer of the benefits from a group policy to an individual one before leaving the company. This way, you don’t have to leave behind the progress made in the policy.
A group term life insurance policy is provided not only to an individual worker, but it also covers the entire team under one plan. It can provide similar coverage to individual plans. While there can be many benefits to such a term policy, the portability depends upon your employer. With Plum Insurance, an employer can provide his employees with the option to transfer benefits before leaving the job.