What is the sum assured in group term life insurance?

It's a normal workday until an HR manager receives devastating news about an employee who has passed away suddenly. Beyond the emotional loss, there’s a financial void left behind for their family. In such difficult moments, a group term life insurance policy becomes a financial lifeline.

Today, many Indian employers include group term life insurance in their benefits package. It’s cost-effective, inclusive, and provides peace of mind to employees and their families. But one question most HR professionals face is ‘how much coverage does such a plan actually offer?’ That’s where the concept of sum assured comes in.

Group term life insurance meaning

Group term life insurance means a single master policy that provides life coverage to a defined group, usually the employees of an organization. The employer acts as the policyholder, and all eligible employees become insured members.

Who can buy group term life insurance?

• Organizations or business groups
• Employer-employee associations
• Banks or professional groups

Key features:

• Covers all eligible members under one policy.
• Low or no medical check-ups for inclusion.
• Premiums are significantly lower than individual policies.
• Annual renewability ensures easy updates and flexibility.

What is a group term life insurance policy?

A group term life insurance policy ensures life coverage for all employees during their employment period.

Here’s how it works:

• The employer chooses the insurer, defines the coverage, and pays the premium, either fully or partially.
• The policy tenure is typically one year, renewed annually.
• The coverage structure can be:
  
  • Flat: Equal coverage for everyone (e.g., ₹10 lakh per employee).
  • Tier-based: Higher coverage for senior or higher-paid employees.
  • Flexible: With optional add-ons like accidental death, disability, or critical illness riders.
• Some policies allow employees who leave to convert coverage into individual term life plans.

What is sum assured in group term life insurance?

The sum assured is the guaranteed amount paid to the employee’s nominee if the employee passes away during the policy term. It represents the financial value of the protection offered.

For example: If an employee’s sum assured is ₹20 lakh, their nominee receives ₹20 lakh upon the insured employee’s death, regardless of the premium paid. The employee’s family can use this money for important things like paying the house loan, education of the children or daily expenses.

Common methods to determine the sum assured:

1. Fixed sum: A uniform cover for all employees (e.g., ₹10 lakh).
2. Salary-based multiple: Usually 2x or 3x the annual salary.
3. Designation-based: Senior staff receive higher coverage.

What is the maximum sum assured in group term life insurance?

There’s no fixed IRDAI cap on the maximum sum assured, it depends on the insurer and the employer’s preferences.

Typical range: Most companies offer coverage between ₹5 lakh to ₹2 crore per employee, but senior executives or high-risk roles may receive higher limits through customized or voluntary plans.

Factors influencing the sum assured

• Company size: Larger groups often get better rates and flexibility.
• Industry risk profile: Manufacturing or field jobs may have higher risk, affecting coverage levels.
• Employee salary brackets: Higher salary brackets often correlate with higher coverage.
• Employer’s premium budget: Determines how much protection can be extended.
• Nature of employment: Desk roles vs. on-site or travel-intensive jobs influence coverage structure.

What are the benefits of group term life insurance?

For employees:

• Provides immediate financial security to dependents in case of death.
• Offers low or no-cost coverage, depending on employer contribution.
• No medical exams needed for the base policy.
• Option for voluntary top-up to enhance protection.

For employers:

• Strengthens employee well-being and retention.
• Fulfills compliance and risk management requirements.
• Enhances your employer brand as a people-first organization.
• Simple administration and renewal process.

Can employees increase their coverage?

Yes. Employees can opt for voluntary top-up or supplementary plans by paying an additional premium. This allows individuals to enhance their life cover beyond the base provided by their employer, giving them greater financial confidence. For HRs, offering this flexibility adds a layer of personalization to workplace benefits, something employees truly value today.

Conclusion

A group term life insurance policy ensures employees and their families are protected against life’s uncertainties while reinforcing the organization’s commitment to employee well-being. For HR professionals, understanding the sum assured helps in designing benefits that are meaningful, fair, and financially sound.

At Pazcare, we help businesses design custom group term life insurance plans that balance affordability with comprehensive coverage. Talk to our experts today and safeguard your most valuable asset, your people.