Group Term Life Insurance — Structure, Benefits & Administration

The structure

Group term life insurance is a single contract issued to an employer, the master policyholder, covering a defined group of employees as members. It is pure term cover: it pays on a member's death and has no savings element. It is commonly renewed each year.

Each member names a nominee, and the nominee receives the death benefit. A scheme may be non-contributory, where the employer pays the whole premium, or contributory, where members share it. Under IRDAI's Master Circular on Life Insurance Products, the Customer Information Sheet goes to every member, not only to the employer.

Sum assured and the free cover limit

The employer chooses how cover is fixed for members. It may be a flat amount for everyone, a multiple of salary, or graded by designation.

Covering a whole group lets the insurer accept most members without examining each one. The free cover limit (FCL) is the maximum sum assured up to which a member is covered without individual medical underwriting. Cover above the FCL is subject to individual underwriting, which may call for medical evidence. The insurer sets the FCL for a scheme under its underwriting policy.

Voluntary cover and EDLI

Group term life is a voluntary benefit, not a legal requirement. The separate statutory cover is Employees' Deposit Linked Insurance (EDLI), which is linked to the provident fund and pays up to ₹7 lakh.

No IRDAI minimum number of members for a group has been identified; the insurer's underwriting decides, and each insurer's product states the minimum group size it accepts. GST continues at 18% on group policies; the nil rate since 22 September 2025 covers individual life policies only.

Claims and complaints

Claims under group schemes follow the same rule as other death claims. Under the Master Circular on Protection of Policyholders' Interests of 5 September 2024, a death claim is settled within 15 days of intimation where no investigation is needed and within 45 days where one is. Older material quotes 30 days. Interest for delay runs at the bank rate plus 2%.

If a claim is rejected, the complaint goes to the insurer first. If it is rejected, not answered within one month or answered unsatisfactorily, the Insurance Ombudsman can be approached within one year. The Ombudsman is open to members of group policies; where the member has died, the nominee or legal heirs may complain, provided the claim is payable to the individual as beneficiary. Awards are capped at ₹50 lakh.

Rules at a glance

Key points

• Group term life is one contract with the employer as master policyholder and employees as members.
• It is pure term cover, commonly renewed each year.
• The sum assured may be flat, a multiple of salary or graded by designation.
• The free cover limit is the maximum sum assured without individual medical underwriting, set by the insurer.
• The nominee named by the member receives the death benefit.
• It is voluntary; EDLI is the separate statutory cover, paying up to ₹7 lakh.
• Death claims: 15 days from intimation, 45 if investigated; Ombudsman awards up to ₹50 lakh.

Common misunderstandings

• The employer does not receive the death benefit in a group term life scheme: the member's nominee does.
• The free cover limit is not the maximum cover available: it is the level above which individual underwriting applies.
• Group term life is not the same as EDLI: one is a voluntary insurance benefit, the other a statutory cover.
• An IRDAI minimum group size is not to be quoted: none has been identified, the insurer's underwriting decides, and each insurer's product states what it accepts.

Questions people ask