- Employer provided life insurance is rarely enough and cannot be customized to your needs
- You will lose the life insurance cover when you quit the job
- Individual term life insurance can be endorsed to Married Women Property Act (MWPA), 1874
- Individual term life insurance plans can help you save tax and the premiums are much lower if you invest early
- The smarter thing to do is to opt for an individual life insurance policy, while the group life insurance policy acts as a backup
Q: I am already covered under my employer’s group life insurance. Do I need to buy a separate term life insurance?
This is an oft asked query. It is a general perception that if you are covered by your employer’s group life insurance plan, you do not need an individual term life insurance. Let’s assess whether the employer provided term life insurance plan is enough.
Employer provided Term Life Insurance Plan Cover Is Not Customized
The employer provided life insurance is meant for the overall group. It is based on the cumulative risk of the group and does not take into consideration the individual needs. Employer term life insurance policy is not customized to your individual needs. This is because it is based on designation, cost-to-company, and role.
Hence, it is wise to opt for an individual life insurance policy that can be customized as per the individual’s financial situation, savings, monthly expenses, liabilities, and health status, while the group life insurance policy serves as backup.
For example, someone with a single child and an earning spouse might require a lesser cover as compared to someone with more than one child and a dependent spouse. The life cover required also varies depending on age, savings, sources of income, number of dependent family members, and income status. Thus, a separate individual plan is advised.
Employer Provided Term Life Insurance Plan Cover Is Not Enough
A company’s term life insurance sum assured is based on its internal calculations, and is influenced by the average risk. However, the coverage that you need is based on your financial situation and should factor for inflation adjusted monthly expenses over a term. Moreover, an individual plan can be bought for 10 to 30 years, depending on age and the policyholder’s requirements.
Employer provided Life Insurance Plan Cannot Be Endorsed To MWPA
If a term life insurance plan is endorsed under Section 5 and 6 of Married Women Property Act (MWPA), 1874, the wife and/or children get exclusive right over the maturity and survival benefits of life insurance plan. They get immunity from creditors and other lenders. Employers’ group term life insurance does not offer this facility.
The job market is uncertain to say the least. Individuals often change jobs for various reasons — some of these are personal choices like moving for better opportunities, starting-up, sabbaticals etc., while others are sudden, like job losses due to change of management policies, retrenchments, and restructuring.
During such intervals, company provided term life insurance cover will be absent. Moreover, your new company might not offer a term life insurance plan to its employees. This is why an individual term life insurance policy is your safest bet. It provides cover for the entire term irrespective of your occupation status.
Premiums paid by the employer for group term insurance plans are treated as business expense and are deductible from their total income, and there are no tax benefits for the employees. However, when you opt for an individual term life insurance plan, you get the tax benefits against premiums (u/s 80C) and maturity benefits (u/s 10(10D).
The benefits of employer provided life insurance scheme are that the coverage is started soon after the employee enrolls. Group policies do not warrant medical tests either. However, the benefits of having your own term plan significantly outweigh those. The flexibility in deciding your life coverage, adding riders, and choosing a suitable period of coverage are must-have benefits.
One should consider buying an individual term life insurance in addition to the company provided term policy. This can provide a wider safety net. You can connect with us to know more about individual term life insurance plans.