Group life insurance plans cover a specific group rather than an individual. Employers usually take it for their employees. Employers provide this insurance plan as a perk for their staff. Examine your pay check and pay stubs to determine whether your employer deducts GTL insurance monthly.
Your employer determines your level of coverage. Sometimes, your coverage is determined by a multiple of your yearly wage. You occasionally have the choice to purchase extra coverage on your own dime. It is important to note that GTL insurance is temporary. It is in effect for as long as you are an employee of your company or for the duration of the policy’s designated term.
Group term life insurance is a specific type of insurance that the employer usually purchases the coverage on the employees’ behalf. On the other hand, other types are life insurance plans are purchased by individuals for themselves or their families.
Additionally, employees are not eligible for a policy loan under the GTL insurance plan. Only whole-life or permanent life insurance plans are eligible for loan coverage.
- Employers can easily cover their gratuity liabilities if they have group-term life insurance. To relieve the employer’s burden, strategically constructed gratuity accounts are utilized to pay for additional gratuity payments. The performance of the funds selected by the client will be considered when calculating returns on investment.
- In India, group-term life insurance plans are more affordable since group plan administration is less expensive
- Employer expenses will decrease as a result of higher returns from performing funds
- Some plans provide employers with gratuities and life insurance
Tax benefits exist for group-term life insurance for both corporations and employees. The present version of Section 10(10D) of the Income Tax Act of 1961 exempts death benefits from taxes.
In many cases, the coverage provided by a group term life insurance does not cover all your liabilities. In that case, it is an excellent practice to go for an individual plan to get additional coverage for your family’s financial safety in case you are no longer around.
Policyholders may avail of several tax benefits with individual term insurance policies. Here’s looking at some of them below:
- Tax Benefits for Life Insurance Payouts- The sum paid out by the insurer as the death benefit for an insurance plan will be completely exempted as per Section 10 (10D) of the 1961 Income Tax Act. There are plans which have the return of premium facilities, and even the refund of the same is tax-free as per Section 10 (10D). The benefit applies if the premium is lower than 10% of the sum assured or if the sum assured amount is a minimum of 10 times the premium amount. If the payout is more than Rs. 1,00,000, and the PAN of the policyholder is there with the insurer, a 1% TDS will apply.
- Tax Benefits on Premium Payments- Term insurance policies come with tax deductions up to Rs. 1,50,000 under Section 80C. However, the annual premium should be at most 10% of the sum assured. In case the premiums surpass 10%, then there will be proportionate deductions that are applicable. For policies issued before 31st March 2012, deductions only apply if the annual premium does not surpass the sum assured’s 20%.
- Tax Benefits under Section 80D- Section 80D is conventionally applied for tax deductions on health insurance plans. However, term insurance policies with critical illness and other applicable riders may enable their policyholders to avail of deductions up to Rs. 25,000. This can be Rs. 50,000 for senior citizens.
Consider all these tax deductions, encompassing group term life insurance and individual term insurance policies. The former is advantageous for most employees, although experts recommend topping up with separate individual life insurance policies for the best possible coverage. Using a life insurance calculator online, you should check the premium amount carefully before buying a plan.