An Insurance under Employer-Employee Scheme
An insurance under Employer-Employee Scheme is the love and concern given by an employer to his/her employee who works hard with sheer dedication for the achievement of various goals of the organization efficiently and effectively.
Under this, the company buys an insurance policy where an employee is a beneficiary. In today’s times, it’s very hard to retain a productive employee. This concept acts as a reward programme for the employee and by which motivates employees to work in the organization. Such a concept runs under the principle that the employer has an insurable interest in his/her employees.
In general many find this concept only for the betterment of the employees but it benefits both employer and the employees.
The following are the characteristics of having an insurance under Employer-Employee Scheme
The employer is the proposer.
Proposal applications for at least 5 employees should be jointly preferred by an Employer, but it can also be taken for one employee only.
Assignment in favor of an employee is compulsory [such assignment could be immediately subsequent to the policy being issued or latest within certain years from such date].
The employee would be the life to be insured,
The first premium to be paid by Employer and subsequent premiums may be paid by the Assignee/or may be continued to be paid by the Employer.
The intention of the Employer is to retain its employees and further that the respective employee or his/her nominee is to benefit in the event of a claim.
Where a death claim is preferred before assignment the claim amount would be released vide a cheque drawn in favor of the nominee of employee life insured, however, the same shall be to the account of the Employer [i.e. the Policyholder].
Let’s have an eye on its details
The concept of Employer-Employee Scheme fulfills various eminent objectives which satisfy various needs of both employer and the employee.
Works as an additional benefit to the employee in order to retain his services for the organization.
Works as a welfare measure for the dependents of the employee in case of premature death or old age provision for the employee himself.
Also acts as a perquisite benefit and adds to the salary of the employees.
The criteria to avail benefits under Employer-Employee Scheme are as follows:
Organisation Type-A company (ltd. or Pvt. ltd.), partnership firm or even a proprietary firm can take the benefit of the scheme.
Share-Holding- Shareholding of an employee in the organization should not exceed 51% of the total shareholdings individually. It is to be noted that an employer who is having a combined shareholding of less than 71% (i.e. shareholding of themselves, spouse & minor child) is only liable to get benefit under the scheme.
Profit Making organization- Generally, a profit-making organization can avail the benefits of this scheme, but in special circumstances, a loss-making organization can also take benefit of this scheme.
All the plans and modes are available in this concept.
Benefits of the Employer-Employee Scheme
Benefits to the Employees
Motivate employees by working as an additional reward to them.
Even though employer pays the premium of the policy under this concept, employees can also claim exemption u/s 80C.
The benefit of maturity proceedings will be availed by the employee only.
Entire maturity proceeding will be tax-free u/s 10(10D) of income tax act.
In case of premature death, the claim will only be paid to the nominee penned by the employee.
Benefits to the Employer
- An employer is entitled to get exemptions for the premium amount (whether it is under single or non-single mode) u/s 37(1) of Income Tax act as business expenses of the firm.
- Exemption u/s 37(1) can bring monetary benefits to the company.
- Employer’s loyalty enhances, as an insurance cover under this concept makes employees feel concerned, secure and honored.
- Details of the life to be insured and the employer is taken for financial underwriting by the insurance company. There must be satisfactory documents justifying that the life to be insured is a Salaried Employee. The Insurer shall have a right to call for a confirmation of the Income Proof for financial underwritings. All products/plans and riders are applicable under this scheme. An employer must ask the employee to duly fill and sign the nominee form with the proposal form. An employee can appoint his spouse/her husband or children as the nominee for the policy. Medical rules under the scheme are considered as specified the by the insurer i.e. the insurance company.
- If the employee leaves the company or the employer (i.e. the Policyholder) does not want to pay the premiums on the policy. Then, in this case, the employer should intimate the insurer (i.e. Insurance Company) in writing either at the company’s servicing branch.
- All renewal and lapse notices will be sent to the policyholder.
- Reassignment of the policy to the employer once assigned is not permissible under the scheme.