Group Term Life Insurance
How group term life insurance works: one master policy for a group, the free cover limit, how the premium is worked out and renewed, what happens when a member leaves, and the rules that apply to group claims.
One policy, many lives
Group term life insurance covers a group of people, usually the employees of one employer, under a single master policy. The employer or other group organiser is the master policyholder; the employees are members whose lives are covered.
Like any term cover it pays a death benefit and has no maturity value. The sum assured may be the same for every member or graded, for example by salary or designation. Group term life is a permitted employer-employee group product, but an employer is not legally required to provide it; the insurance benefit under the provident-fund scheme is a separate statutory benefit.
The free cover limit
Members are generally covered up to a free cover limit (FCL) without individual medical underwriting. The FCL is the highest sum assured for which a member is covered on that basis. A member whose cover exceeds it is underwritten individually for the excess.
The insurer sets the FCL for each scheme, looking at factors such as the size of the group and the pattern of sums assured.
Premium and renewal
Group term cover is often a one-year renewable contract. The premium is recalculated at each renewal for the group as it then stands, so it moves with the make-up of the group. Single-premium and longer-term group products also exist.
The premium is commonly expressed as a rate per ₹1,000 of sum assured, applied to the total sum assured of the group. Actual group rates depend on the make-up of the group. The GST exemption that applies to individual life policies from 22 September 2025 does not cover group policies.
Leaving the group, and claims
Group cover is tied to membership. It normally ends when a member resigns, retires or is terminated, unless the scheme offers a continuation or conversion option. A person who then looks for individual cover is underwritten at the age and state of health reached by that time.
Group schemes fall under the IRDAI (Insurance Products) Regulations, 2024 and the Master Circular on Life Insurance Products of 12 June 2024, under which the Customer Information Sheet goes to every group member. Group death claims follow the same timelines as individual ones: settlement within 15 days of intimation, or 45 days where investigation is needed.
Rules at a glance
Above and below the free cover limit
Illustration, with assumed figures: a scheme has a free cover limit of ₹50 lakh. Asha's cover under the scheme is ₹30 lakh, which is below the limit, so she is covered without individual medical underwriting.
Her colleague Dev is entitled to ₹80 lakh. He is covered for ₹50 lakh without underwriting, and the insurer underwrites him individually for the excess of ₹80 lakh − ₹50 lakh = ₹30 lakh. If Asha later resigns, her ₹30 lakh of group cover normally ends with her membership.
A group premium from a rate per thousand (illustrative figures)
- Assumptions, for arithmetic only: 150 employees; total sum assured ₹45,00,00,000 (₹45 crore); rate ₹2.00 per ₹1,000 of sum assured for the year; GST on a group policy taken at 18%.
- Base premium = ₹45,00,00,000 ÷ 1,000 × 2.00 = 4,50,000 × 2.00 = ₹9,00,000.
- Average per employee = ₹9,00,000 ÷ 150 = ₹6,000.
- GST at 18% = 18% of ₹9,00,000 = ₹1,62,000.
- Total payable = ₹9,00,000 + ₹1,62,000 = ₹10,62,000.
Result. The base premium is ₹9,00,000, or ₹6,000 per employee on average, and ₹10,62,000 with GST. The rate is illustrative; at the next renewal it is recalculated for the group as it then stands.
Key points
- A group term policy is a single master policy held by the employer or organiser, covering the members' lives.
- The free cover limit is the highest cover a member gets without individual medical underwriting.
- Group term cover is often yearly renewable, with the premium recalculated for the current group at each renewal.
- Cover usually ends when the member leaves the group, unless a continuation or conversion option exists.
- Group death claims are to be settled within 15 days of intimation, or 45 days if investigated.
Common misunderstandings
- Group cover is not a personal policy: the master policyholder is the employer or organiser, and cover follows membership.
- The free cover limit is not the maximum cover available: cover above it is possible, subject to individual underwriting of the excess.
- The nil GST rate on individual life policies does not extend to group policies.
Questions people ask
A company's group policy has a total sum assured of ₹60 crore at ₹1.80 per ₹1,000. What is the annual base premium?
₹60,00,00,000 ÷ 1,000 × 1.80 = ₹10,80,000, before any tax. For 200 employees that is ₹5,400 each on average.
An employee estimates her family's need at ₹1.85 crore and has ₹40 lakh of group cover. How much lies outside the group policy?
₹1.85 crore − ₹40 lakh = ₹1.45 crore. If the group cover ends on leaving the employer, the shortfall against her estimate widens by ₹40 lakh.
Is an employer bound by law to buy group term cover?
No. Group term life cover is not legally mandatory for employers; the insurance benefit linked to the provident-fund scheme is a separate statutory benefit.
What this lesson relies on
- IRDAI (Insurance Products) Regulations, 2024
- IRDAI Master Circular on Life Insurance Products (12 June 2024) — group products
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024) — claim timelines
- GST Council, 56th meeting (3 September 2025) — exemption for individual policies
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.