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What is Employer Employee Insurance Scheme?

21-07-2022 |

Workers or employees are the lifeblood of any organisation. The success of a business depends largely on how its employees perform. However, talented employees are often very tough to retain for longer periods. They are well aware of the job opportunities in the market and are always looking for better options. And the shortage of skilled workforce only adds to this problem.

Therefore, as a business owner, employee retention should be your topmost priority. You need to take adequate steps to keep your employees motivated and happy while working for your organisation. One of the tools that you can use to achieve this objective is the Employer-Employee Insurance scheme. Apart from employee retention, it can also help you save on taxes*.

Let’s learn the details of the Employer-Employee Insurance scheme and how you can benefit from it.



What is the Employer-Employee Insurance scheme?

An Employer-Employee Insurance scheme is an arrangement in which an employer purchases a life insurance scheme for its employees. It means that the premiums are paid by the employer, but the beneficiaries of the policy are their employees. It acts as an additional benefit provided by an employer to their existing employees.

This kind of arrangement helps an employer ensure the social security of their employees and also reduces the employee attrition rate. Besides, the premiums paid towards an Employee Insurance scheme can be claimed as business expenses, and hence, the employer can use them to reduce their income tax* outgo.



What are the Eligibility Criteria For Buying Employer Employee Insurance?

Any business entity with five or more employees can buy Employer-Employee Insurance in India. It can be a sole proprietorship business or a large corporate house, or any other legal firm. Below are the key parameters that define the eligibility criteria for procuring Employee Insurance in India:

  • Any company, be it a proprietorship company or a partnership firm, with five or more employees, is eligible to buy this policy for its employees

  • The combined shareholding of the employees and their immediate relatives, such as children, spouses, parents, and in-laws, in the employer’s company should not be more than 51%

  • There has to be some sort of financial relationship between the employer and the employees. For example, they must be under a legal contract to get a monthly salary for offering their services

  • An employer can even purchase this scheme to provide benefits to its NRI employees, provided that they have a registered office in India

These are the general eligibility parameters for an Employee Insurance scheme. For specific details, you can visit the Employer-Employee Insurance section on the website of your insurance provider.



What are the Benefits of the Employer-Employee Insurance Scheme?



The Employer-Employee Insurance scheme has some benefits for employees as well as employers. Let’s explore them one by one:

Benefits for the employer

Here are the benefits that you can get as an employer by taking an Employer-Employee Insurance scheme:

  • It can help you immensely in retaining your existing employees. Knowing that they are financially secure against adversities, your employees will feel motivated to work for your organisation. Opting for such a scheme can also help you attract a talented workforce to your organisation.

  • Your employees are the backbone of your business. They work day in and out for you. Hence, it becomes your moral responsibility to take care of them and their family members if something happens to them. With an Employee Insurance Policy, you can ensure the social and financial security of your employees

  • You can claim the premiums paid by you towards an Employee Insurance Policy as business expenses and hence, claim tax* deductions on them under section 37(1) of the Income Tax* Act of 1961. Apart from the Employer-Employee Insurance tax benefits, you can also get several other monetary advantages by opting for this scheme

Thus, there are benefits of the employer insurance scheme to the employer.



Benefits for the employees

Employees are the main beneficiaries under the Employer-Employee Insurance scheme. Below are the benefits that an employee can get under this scheme:

  • This scheme works like a reward program for an employee. It offers an additional benefit for them apart from the salaries that they receive from their employer. Thus, they remain motivated and loyal to their employer.

  • It ensures the financial and social security of the employees and their dependents. It means that even if something happens to them while working for their employer, their loved ones can continue to live peacefully with the policy benefits that they will receive.

  • Even though the premiums are paid by the employer under this scheme, the employees can claim tax* deductions under section 80C of the Income Tax* Act. The policy benefits are also free of tax* under section 10D.

  • The scheme insures the employees against unforeseen accidents, illness, disability, and death. In the case of the untimely death of an employee, the benefits are paid to their nominee.


How is an Employer-Employee Insurance policy different from a Keyman Insurance Policy?

It is quite common to get confused between an Employer-Employee Insurance policy and a Keyman Insurance Policy. Although they both seem similar, they are completely different from each other. On the one hand, a Keyman Insurance policy is a term life insurance policy wherein the death benefits are paid to the employer and attract income tax*.

On the other hand, the Employer-Employee Insurance scheme is an arrangement where the policy benefits are paid directly to the employees without any tax* implications. Also, this term can be used for any type of insurance offered by an employee to their employees. It may be life insurance or health insurance, or both.



The Conclusion

At the current time, taking an Employer-Employee policy can be a great idea for all businessmen with five or more employees. It provides benefits for employees as well as employers.

With Tata AIA Life Insurance, you can fulfil all your insurance requirements in a hassle-free manner. You can visit our website or your nearest office to know the details of the policies offered by us before buying the best-suitable plans for yourself.

L&C/Advt/2022/Jul/1635

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+91

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA), Tata AIA Life Insurance is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

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