Group term life insurance

What is group term life insurance?

Group term life insurance is life cover issued under one master policy to a group of people, with the group's organiser as the master policyholder. If a covered member dies while the cover is in force, the insurer pays the sum assured to that member's nominee. Most schemes are one-year renewable term covers with no savings element, so premiums are low and there is no surrender or maturity value.

Employers use it as a staff benefit, often setting the sum assured as a multiple of annual salary or a flat amount by grade. Associations, cooperatives and government bodies use it to give members basic protection. PMJJBY is the largest government-backed example.

How group term insurance works in India

Who can be a group. The IRDAI (Insurance Products) Regulations, 2024 recognise two kinds of group:

The Master Circular on Life Insurance Products (June 2024) lists the group products allowed for each type. Group term, one-year renewable group term and single premium group term are allowed for both. Group term products can have terms as short as one month.

Pricing. Premium is set per member using the insurer's filed rates for the group's mortality profile. Under the master circular, discounts and loadings for group-specific factors such as group size must follow objective criteria in the filing. All discounts together cannot exceed 30% of the approved premium, and the same cap applies to all loadings together. Profit sharing or experience refunds are allowed only on a scheme-year basis and only where the scheme has at least 1,000 life years. The profit share is capped at 75%, or 90% for schemes with one lakh life years or more.

Administration and claims. The Master Circular on Protection of Policyholders' Interests (September 2024) sets out how schemes run:

• In an employer-employee scheme, the employer shares the policy with members, and claims are paid directly to the employee's nominee or beneficiary.
• In a non-employer-employee scheme, the insurer issues a certificate of insurance to every member, collects premium directly from members, and settles claims directly with them.
• If the group policy is surrendered, members must be offered the option to continue as individual policyholders.

Tax. From 22 September 2025, GST was removed on individual life insurance policies. Group policies were not part of that exemption and continue to attract GST at 18%. That difference matters when employers compare group cover with reimbursing individual policies.

Group term vs individual term

What group term insurance means for distribution

Group term is a volume and relationship business. It is sold mainly by brokers, corporate agents and insurers' own group teams, and it opens doors for other products.

• Renewal is the real sale. One-year schemes are re-priced and re-tendered every year. Claims experience, service on past claims and speed of member additions decide whether the scheme stays.
• Data quality drives price. Accurate member data (ages, salaries, joiners and leavers) reduces disputes at claim time and keeps the premium fair.
• Service is measured on claims. An employer remembers how fast a deceased employee's family was paid. Distributors who manage claim paperwork with the HR team build the strongest renewal case.
• Free cover limits create exposure. Members above the free cover limit need individual underwriting. If this step is missed, a large claim can be restricted to the free cover amount, which damages the relationship.
• Use the scheme for individual sales, carefully. Group cover usually ends when the employee leaves and is often lower than the family needs. Worksite advice on top-up term cover is legitimate, but it must not suggest the employer requires the purchase.
• Watch conduct rules for affinity groups. For non-employer groups, premiums and claims must flow directly between insurer and member. Distributors cannot collect premiums in their own accounts.