What is Employer-Employee Insurance?

In today’s world of professional management success of a company solely depends on the Individual Talents of employees, whose Skills, Integrity and other capabilities are essential for the future progress and prosperity of the company.

Exit of an employee due to resignation will result in immediate financial loss to company, as the Employer has to spend considerable amount of time and money to recruit and train the new employee and moreover upon exit of an employee, the employer may loose some of the trade secrets. Then question arises, how does a company retain the Employees?

The company on the lives of Employees purchases Life Insurance, which will provide money to their family members in event of their premature death and also makes provision for their old age.

These additional benefits will act as sufficient inducement to continue with the present Employer.

Why Life Insurance Policy?

Honoring employees by giving promotions is a one-time affair.

The continuous way of honoring is by giving them an Insurance Policy as a gift.

Can be given to Selective Employees.

Tax Benefit to Company.

Tax Benefit to Employee.

Eligibility of Employers:

Any Employer, whether it is Sole Proprietor or Partnership Firm or Private/Public Limited Company or other Non-Profit legal entity can propose for Insurance for their Employees provided they have minimum 5 Employees. It is not mandatory that all insurable employees should be covered under the scheme.

Sole Proprietorship:

Can Propose for Insurance on the Life of their Employees.

Partnership Firm:

A firm can propose for Insurance on the Lives of their Employees and/or any working Partner/s who fulfill the criteria od Share Holding and Employer-Employee relationship is established.

Private / Public Limited Companies:

Can take insurance on the lives of their Employees who fulfill the criteria of shareholding. The company can also take insurance on the lives of their full-time Directors provided they satisfy the criteria of shareholding and Employer-Employee relationship is established.

Other Non-Profit Entity such as NGOs/Society/Clubs/Trust/AOP (Association of Persons):

Such legal entities can take insurance on the lives of their employees who are under formal contract of employment. Members / Sponsors or Trustees are not covered under the definition of employee for the purpose of insurance under the Employer-Employee Scheme.

Employees Eligible for Insurance under Employer-Employee Scheme:

Any employee employed with and drawing a salary from any of the employers mentioned above and able to establish an Employer-Employee relationship are eligible for insurance under Employer-Employee Scheme.

Shareholding of the employee should be less than 51% and family holding (i.e. his/her spouse and minor children) should be less than 71% in the employer company/firm.

In the case of Private / Public Limited Companies, if an individual shareholding is less than 51%, but family shareholding is 71% or more but less than 90%, such proposals should be referred to NB&R, Central office for Individual consideration.

Financial Underwriting:

There is no cap on maximum insurance per employee. The maximum Insurance allowed will depend upon the Age and Income of the Employee.

The premiums payable by the employer will also be considered as Income for purpose of arriving at maximum Insurance eligibility.

The profitability of the Company / Firm / Non-Profit entity is to be assessed as the premium liability lies with the employer.

Tax Benefits under Employer Employee Insurance:

Premiums paid by the company can qualify as eligible business expenses under Sec.37 (1) of the IT Act, provided it is not for the personal benefit of assesses. The corporation does not take any responsibility for Tax admissibility.

Premiums paid by the company are treated as perquisite in the hands of the Employee under Sec.17 (2) (V) of the Income Tax Act.

An employee is entitled to claim a tax rebate u/s 80C for the premiums paid by the employer.

Maturity proceeds are tax-free u/s 10(10D) in the hands of an employee if conditions of section 10(10D) are


How Employer Employee Insurance is bonanza for corporate sector?

The company can claim premium paid as expenditure, hence Tax Payable by Company reduces

The welfare of the employee is ensured

Estate is created for the benefit of an employee

The loyalty of the employee is guaranteed

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