What is the significance of a Free Cover Limit in Group Term Life Insurance policy?

A group term life insurance policy provides term cover to a group of individuals. It is a cost-effective way to insure multiple members of a group under a single policy. The Master Policy ensures each member individually and pays a financial benefit if the member passes away during the term of the policy.

Under group-term insurance plans, the maximum sum insured is determined by the insurance company. This is where the concept of free cover limit comes into the picture. Let’s understand what this is all about.

Free Cover Limit meaning:

Also called the No Indemnity Limit, the Free Cover Limit is the maximum sum assured that the insurance company allows to each member of the group without requiring any medical underwriting.

The Free Cover Limit is determined based on the –

  • Size of the group – the lower the number of members being insured, the lower the limit
  • The nature of the group – the riskier the group, the lower the limit and vice-versa.
  • The average age of the members – the lower the age, the higher would be the limit and vice-versa.

How is the Free Cover Limit important for group term insurance policies?

The Free Cover Limit holds great significance in group-term insurance plans. Here’s how –

It determines the coverage:

The Free Cover Limit determines the maximum coverage that members can avail of in a group life plan. This, however, doesn’t mean that the groups have to opt for coverage equal to the Free Cover Limit. The limit simply determines the maximum coverage available without any underwriting. Groups can opt for lower coverage, too, which will be easily available without individual underwriting.  

It determines the premium:

Since the Free Cover Limit determines the sum assured, it also determines the premium payable by the group. The higher the Free Cover Limit, the higher the premium and vice-versa.

It is not rigid:

An interesting thing to note about the Free Cover Limit is that it is not rigid. Individual members can request a higher sum assured too that exceeds the allotted limit. In such cases, members can submit proof of insurability by undergoing medical underwriting or simply submit a declaration of good health, depending on what the insurer needs, and opt for a higher coverage level under the group term plan.

It limits the insurer’s coverage risk:

The reason why a Free Cover Limit is applicable is that it limits the insurer’s exposure to risk. In a group term plan, underwriting each member might prove costly and time-consuming. The insurer, thus, cuts down on the costs and time involved through the Free Cover Limit. By determining the maximum coverage that can be allowed, the insurer does not have to underwrite each member and still limit its exposure to the risks involved in covering multiple individuals with varied mortality risks.

The bottom line

So, understand the Free Cover Limit meaning if you are a member of a group term life insurance policy. Find out the Free Cover Limit the insurance company has determined for the group. If you want higher coverage, you can apply for a term life insurance plan, submit your documents and make an online payment and you can get insured for a higher sum assured for enhanced coverage. With the help of the term insurance premium calculator, you can also check your premium well in advance before opting for the plan.


Sanket Goyal is an SEO specialist at and is passionate about new technology and blogging.

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