- What is Group Term Life Insurance?
- Benefits of GTL
- Taxability of GTL
- The Bottomline
As an employee-oriented employer, you might offer group term life insurance or GTL as a part of the employee benefits package. However, freshers or people unaware of GTL might get perplexed when they see GTL listed as one of the benefits on their paycheck. How can you bridge this knowledge gap? You could start by including GTL (and its explanations) in the benefits section of the employment contract. You can also set up HR interactions with the new joiners, where they discuss the monetary compensations and the non-cash earning benefits like various types of insurance that you will provide.
Documenting GTL could be a complex affair. So, let us simplify it further.
What Is Group Term Life Insurance?
Let’s begin with the very basics. A group term life insurance is similar to term life insurance; it offers death benefits to the covered beneficiaries in case of the employee’s untimely death while the policy is active. As the nomenclature suggests, this policy covers a group of people. Therefore, it is an essential part of an institution’s employee benefits.
GTL is a relatively flexible term insurance policy. It can be extended to cover the employee and their spouse and children. They might also have the opportunity to get extra coverage at your expense. However, it is equally important to state that group term life insurance is not permanent term insurance. It will be in effect as long as that organization employs that employee.
As an organization invested in safeguarding the interests and health of your employees, you must also encourage them to apply for a digital health card. It is a digital database of medical records of all the people in the country. No one carries medical records with them all the time. But during any medical emergency, access to previous medical history can save both time and lives. Therefore, urge your employees to apply for a digital health card today. A timely diagnosis can save their lives which can do away with the unfortunate occasion of having to claim a life term insurance policy.
Benefits of GTL
The next step is to educate your employees on the various benefits of GTL.
- Financial security – The financial security of an entire household is affected if the sole breadwinner dies. A GTL provides monetary compensation (lump sum or equated amounts) for the insured’s dependents like parents, spouse, and children in case of natural or accidental death of the employee. This extends support and security to the dependents in times of crisis.
- Prerequisites – GTL is a straightforward insurance policy that has no conditions. An employee can avail themselves of the insurance from the day they join the company.
- Flexible – This customizable insurance policy can be tweaked according to an individual’s priorities. They can extend it to cover even their spouse and children.
- No prior records are needed – This is a hassle-free insurance policy. It implies that employees do not have to submit any medical check-ups to avail of this policy. This means that this insurance also covers any existing disease.
- Additional riders – GTL is a very subjective matter. Everyone’s priorities vary in terms of their dependents and goals. So, employees can opt for other riders on the base plan, like accidents, disability, maternity, or daycare benefits.
Taxability of GTL
The next step is to explain the taxability of group term life insurance to your employees. Most commonly, the premiums for the term insurance are paid through the organization. So, GTL is a no-cash benefit enjoyed by the employees. Hence, tax benefits on these premiums apply only to employers.
However, if your employee opts for additional riders on the base plan, they will have to pay for those extra benefits at their expense. In this light, they can claim tax benefits on the premium paid under Section 80D of the Income Tax Act. However, this Act deals with health insurance. Therefore, to enjoy tax benefits on term insurance, they must opt for critical illness riders, which come under health insurance.
The employee can claim tax benefits up to Rs. 25,000 per annum on premiums for them, their spouse, and their children. If they pay their parents’ health insurance premiums, they can claim additional tax benefits up to Rs. 25,000 per annum. Up to Rs. 50,000 per annum can be claimed by them if they are above 60 years of age.
A GTL is a perk employers offer employees at no cost to the insured. It is a great way for employees to safeguard the financial interests of their loved ones when they need it the most. Since many companies also allow employees to choose additional riders according to their requirements, it can be an inexpensive means to ensure the security of their dependents.
Why is GTL mentioned in the employee’s payslip?
GTL is a component of the employee benefits package and is listed under non-cash benefits of the paycheck. Therefore, the company will bear the premiums.
What is the age range for availing GTL?
The minimum age for accessing GTL is 18 years, and the maximum is 69 years.
Can one choose not to accept GTL coverage?
GTL is a non-cash benefit the company offers. The premiums are also taken care of by the organization. So, there is no downside to it; hence, it does not make sense for the employee to opt out of it. Moreover, not every company gives the window to give up GTL.
Can one convert GTL to individual term insurance?
GTL is not permanent term insurance, meaning an employee will lose the policy while changing jobs or resigning. Therefore, they might want to transfer those benefits to individual term insurance if the need arises. However, not every company allows this transfer; it comes with higher premiums even if they can get it.
Do employees need to pay for the premiums?
No. You, as the employer, pay the premiums for GTL. However, if an employee opts for additional coverage and riders, the extra cost must be borne by them.