Everything You Need to Know About Employer-Employee Insurance Schemes

Employer-employee insurance provides financial security not only to employees but to their family members as well. Here, the employer buys an insurance policy and makes payments towards the premium amount, and the employee is the beneficiary of the insurance policy. It helps attract new talent and retain the old ones by ensuring a sense of security towards the employees. 

Eligibility Criteria#

Under the Employer Employee Insurance scheme, the employer should be any of the following:

• Sole Proprietorships
• Corporates, Corporations, and conglomerates
• Partnership Firms
• Public and Private Companies
• NRIs working at MNCs registered in India
• MSMEs
• Companies facing financial difficulties and losses

Tax Benefits#

Provided are the tax benefits for an employee:

• There are many tax benefits that can be claimed depending on the group term life, accidental insurance, or group insurance.
• It helps secure families totally free of cost.
• It provides Income Tax Benefits as per Section 80C of the Income Tax Act, 1961.
• It provides financial protection to the family members in case of sudden demise of the policyholder.
• The proceeds of the insurance are tax-free as per Sec 10D of the Income Tax Act, 1961.

Provided are the tax benefits for an employer:

• The tax exemption can be availed as per sec 37 (1) of the Income Tax Act, 1961, towards the payment of premium.
• It provides monetary benefits if the premium is declared under business expenses.
• It helps reduce the company’s attrition rate in the long run.
• It provides a sense of security to the employees.

Type of Arrangements#

There are two types of arrangements:

Type A: Where the Proper is Employer, and the Employee is the Life-Assured#

• Consider Proposal Form No 340 to insure somebody else’s life.
• The policy here is allocated towards an employee for a minimum period according to the agreement entered upon between employer and employee.
• An authorised person should sign the proposal through the resolution.
• The books of accounts or Income Tax orders, if any, for the last 3 years should be submitted to assess the profitability.
• A letter containing the restrictions and objectives of the insurance.
• The policy will be handed over to the employee after a certain period of continued employment.
• The employer may decide to pay a premium even after the pre-decided ownership period to get the tax benefits.

Type B: Employee is Both Life Assured and Proposer#

• Consider Proposal Form No 300 to insure somebody else’s life.
• Here, the employee behaves like an owner without any restrictions imposed.
• There is no need for the policy assignment through an employer. 

Conclusion#

Employer employee insurance is quite important for business purposes as it provides financial support in case of health-related emergencies. It offers varied benefits both for employers and employees. It helps enhance the bond between employer and employee, retains employees, attracts new talent, and promotes overall well-being. It is considered to be a valuable and versatile tool that helps foster a healthy work culture.