Employer-Employee Insurance: Benefits and Tax Guide

Employer-employee insurance is like a full suite of protection plans that assist your workforce in medical distress.

Why is this important? Because health and wealth are both key components of your team’s well-being. Recent global health crisis, like COVID-19, has put added emphasis on comprehensive health insurance coverage. However, high premiums and heavy T&Cs discourage people from getting a retail insurance.

This is why getting a group health insurance cover is a no-brainer for organizations. With a good worker’s insurance policy in place, your nine-to-five operatives and their kin are protected from life’s unpredictable nature.

How? – In harsh times, the insurance policy will act as a financial cushion if anything happens to any of your employees. Teams can include their family members under the master plan and avail cover against emergency hospitalisation and accidental injuries. This policy is designed to cover the relevant hospital bills and medical expenses incurred by you in times of an emergency.

In short, money matters, and so does your health. We do not want you to lose any of the two. It is better to keep them in the best state possible. As a co-founder of a budding startup, SME, or even a big conglomerate, an ideal method to instrument such a protective scenario is by getting a comprehensive employee-employer insurance scheme.

Also Check: Group Personal Accident Insurance & Group Term Life Insurance

What is Employer-Employee Insurance?

An Employer-Employee Insurance is a type of policy in which an employer purchases a life insurance policy and beneficiary for its employees. It means that the ownership of the policy is with the employer and the premiums are paid by the employer while the employee is the beneficiary of the policy.

This practice of group insurance policy is mostly followed by employers because it works as a tool to retain old employees, attract new employees & ensure the social security of their employees.

How does Employer-Employee Insurance Scheme work?

Employee employer insurance works on providing uniform health coverage to each member of the organisation. An employer purchases a group life or group health plan for its workers at zero cost to the employee’s wages. It is a benefit of working in the company. Yes, you read this correctly. As an employee, you need not pay a single penny to avail yourself and your family of health insurance under a group scheme.

Think of it as an inbuilt feature complementary to your cost-to-company (CTC) because the company pays the premium on your behalf. In return, employees benefit from availing of medical/term insurance at no cost to their salaries. As a bonus, many companies also include super top-up and personal accident insurance as a part of their group master policy.

For example, the following table summarises the four basic plan types commonly included in corporate insurance coverage in India.

Group Cover - This is a group medical health insurance plan—a master policy to provide medical insurance coverage to all members/teams of the company.
Group Term Life - This term life insurance plan comes with life insurance for employees under a single umbrella policy.
Group Personal Accident - A group scheme that protects workmen against accidental injuries. Includes temporary total/permanent partial/full disability as well.
Super top-up - This is an add-on, a rider option to increase the sum insured over and above the basic medical plan.

Employer-Employee Insurance - Who is eligible under this plan?

Apart from being legally employed, your age should be between 18 and 60 years to meet the minimum criterion. In the case of an organisation:

Sole proprietor
Corporates, corporations, and conglomerates
Partnership firms
Public and private companies
NRIs working at MNCs registered in India
MSMEs
Companies running in difficult times and facing losses are also eligible

Still don’t connect with points 1-7? No worries, with Plum Insurance, you get health membership benefits starting at INR 85 per month for teams of all sizes.

Employer Employee Insurance - Benefits for the employer

It can enhance employee loyalty, as the employees feel more valued and secure.
The attrition rate of the employees goes down with this scheme.
The premiums paid for this scheme by the employer can qualify for a tax exemption under Section 37(1) of the Income Tax Act, as they are considered business expenses.
The tax benefits obtained through Section 37(1) can potentially result in financial gains for the organization.

Employer Employee Insurance - Benefits for the employee

The insurance scheme functions as a reward program, thereby boosting employee morale.
Only the employees have access to the maturity proceeds.
Although the employer pays the premium, the employee is entitled to claim a tax exemption under Section 80C of the Income Tax Act.
The entire maturity amount is tax-exempt as per Section 10D of the Income Tax Act.
The insurance plan can be selected to provide employees with protection against accidents, illness, disability, and premature death.
In the event of death, the death claim is disbursed to the employee's nominated beneficiary.

Employer-Employee insurance: Tax benefits

Listed are the income tax benefits if you are an employee under an E-E policy.

Depending on group term life, personal accident, or group insurance plans, there are multiple benefits to claim.
Employees get to secure their families free of cost.
Income tax benefit as defined in Section 80C of the Income Tax Act, 1961.
Family members will get financial protection against the death of their related employee.
The maturity proceeds of a GTL policy are free of tax – Section 10D of the Income Tax Act, 1961.

Listed are the tax advantages for an employer under an E-E scheme.

As per Section 37(1) of the Income Tax Act, 1961, a company can apply tax exemption for the premiums paid towards an E-E plan.
The employer can declare the premium under business expenses, thus, bringing about monetary benefits.
Any form of corporate-sponsored employee insurance will reduce the company’s attrition rate in the long run.
Employees feel more secure working in an organisation, hence less likely to leave. Thereby improving loyalty.

What is the Structure of Employer-Employee Insurance?

By default, there are two types of settings in an E-E plan. This setup can be different across each institution.

Type A

1. Proposal - Employer is the proposer. Employee's Life is insured.

2. LIC form(if applicable) - Form no 340

3. Policy assignment - Assigned to the policyholder, that is, the employee in this scenario

Type B

1. Proposal - Proposer and life insured is the employee

2. LIC form(if applicable) - Form no 300

3. Policy assignment - Not required from the employer

Notes for Type A

Employer can impose restrictions and objects of insurance with a separate letter mentioned in the same.
Since the premium has to be paid by the company, the organisation’s profitability has to be disclosed with IT records for the last three years.
An employer can assign the policy to the employee during employment for 3-5 years.
The company has the right to prevent any misuse of the policy, such as surrendering or taking a loan against the term plan by an employee.
An organisation can continue to avail of tax benefits after the predefined ownership period.
If an employee leaves the company, the organisation can surrender the insurance plan or assign it to the workers as a part of their respective concluding advantage.

Employer Employee Insurance PPT and PDF

You can check out the Employer Employer Insurance PPT and PDF below.

1. Employer Employee Insurance - PDF
2. Employer Employee Insurance - PPT

How is employer-employee insurance different from Keyman insurance?

Many insurance plans, such as those illustrated in table 1.0 on top, are known as E-E schemes. Employees or their family members are entitled to all E-E benefits. Keyman is a kind of term life insurance policy in which the death benefit is paid to the employer rather than to the employee’s family. Moreover, keyman plans attract tax for the employer.

We all know that good health and wealth can tremendously impact the psychologically proven well-being of your modern workforce. So why don’t you let us help build the best combination of the two for your employees?

Go beyond insurance; check out our Top 8 Fun Friday Games blog.

FAQ

Q. How do companies determine the coverage amount for each employee under the Employer-Employee Insurance scheme?

A. Companies assess the employee's role, salary, and criticality to business operations to determine the coverage amount. Therefore, the coverage reflects the employee's value to the company.

Q. Can employees customize their coverage under the Employer-Employee Insurance plan, or is it a fixed scheme decided by the employer?

A. Generally, the employer decides the coverage terms based on group policy agreements. However, employees might be offered options for additional voluntary coverage, making the plan somewhat flexible.

Q. What happens to the Employer-Employee Insurance coverage if an employee leaves the company?

A. Upon leaving, the coverage typically ends. Some policies allow conversion to an individual plan, enabling the employee to maintain coverage by assuming payment of premiums. Therefore, it's crucial for employees to understand their options upon exiting the company.

What is Employer Employee Insurance? - Eligibility & Tax Benefits