Top 5 Facts to Know About the Employer-Employee Insurance


An employer-employee insurance policy is a perquisite provided by the employer to a group of employees. Through this scheme, the employer looks to provide a financial buffer to the workforce during unforeseen emergencies.

By and large, it needs to be understood that creating a savings plan may not be enough to cater to all the financial needs of an employee. So, an employer with the motive to retain them longer and offer them a valuable addition provides them with a group plan that covers them against specific issues.

It is easy for a layman to misunderstand these policies as keyman plans. But there is a significant difference between these two. While a keyman plan primarily acts as a group term life insurance, an employer-employee insurance plan can refer to any type of insurance facility.

This article discusses the top 5 facts about employer-employee policies that can enable you to make a more informed decision.

  1. What are the Eligibility Criteria of an E-E Insurance Plan?

Employers and employees must meet and comply with specific eligibility criteria to avail of the benefits of the employer-employee scheme.

Let us see the crucial eligibility criteria for both employers and employees.

Employer-Employee Scheme Eligibility Criteria for Employers

  • The organization must meet the minimum coverage criteria with respect to the number of employees covered while applying for the employer-employee plan. Organizations with a minimum of 20 employees can apply for a group health cover. The Insurance Regulatory and Development Authority of India (IRDAI) has also allowed micro-insurance policies to companies with five employees or fewer.
  • A company running in loss can also take advantage of this insurance policy.
  • Solo entrepreneurs with no employees are not eligible to buy group plans.
  • Anyone running a family business cannot buy these plans, as the spouse cannot be considered an employee and, therefore, cannot be covered by an employer-employee plan.
  • You cannot subscribe to an employer-employee plan merely to cover dependents, but if you already have a group plan, you can pay an additional premium to include them under the policy.

Employer-Employee Scheme Eligibility Criteria for Employees

  • The minimum age of the employees or the benefactors to avail of this policy is 18 years. The maximum eligible age for this insurance scheme is 60 years.
  • The employees working as contractors or on companies’ payroll are also eligible for this policy.
  • The relationship between employees and employers is required and is one of the mandatory criteria of this insurance scheme. It is one of the crucial points, as the employee receives remuneration for the services delivered to the employer.
  1. Types of Plans 

Listed below are the four primary types of employer-employee policies prevalent in India –

  • Group Cover – A group medical health insurance plan to provide health coverage to all the eligible employees in an organization.
  • Group Personal Accident – A group plan that provides cover against accidental injuries. It also includes events resulting in temporary/permanent disability.
  • Group Term Life – A term life insurance policy for all the eligible employees covered under the same plan.
  • Super Top-up – An additional rider option that allows increasing the cover over and above the existing group mediclaim policy.
  1. Tax Benefits of the Employer-Employee Insurance 

To avail of the benefits of the employer-employee scheme, both parties sign a legal agreement form issued by the insurance provider. The employee also files the standard proposal form issued by the insurance provider. After the completion of documentation work, the employer pays the premium for the policy.

Employers and employees can avail of tax benefits by subscribing to an employer-employee plan. Here are the benefits –

  • In most cases, the employer is the one paying the premium amount for the policy. But the Income Tax Act 1961 allows employees to claim its exemption under Section 80C.
  • If the employee raises a claim or the policy matures, the proceeds are tax-free, as stated in Section 10D of the Income Tax Act, 1961.
  • The employer can declare the premium paid as business expenses of the organization. The firm may avail of tax exemption under section 37(1) of the Income Tax Act, 1961 for the said amount.
  1. Key Benefits to Employees

Now that we know about the top facts and tax benefits of employee insurance, let’s explore some of its advantages for employees:

  • The employee can avail of the benefit of the cover mentioned in the insurance documents without purchasing the insurance scheme.
  • The claim amount is only available to the employee or their nominee, and the employer has no share in it, unlike in keyman insurance, where the business receives the claim proceeds.
  • There are several riders available which allow the employees to cover their dependents or increase the policy amount by paying an additional premium.
  1. Different Types of Arrangements for the Employer-Employee Scheme

There are two primary arrangement types while subscribing to an E-E insurance scheme.

  1. Type A: Here, the proposer of the scheme is the employer. The employee is the life insured. For such arrangements, Form No. 340 is to be filled, and the employer assigns the policy to the policyholder.
  2. Type B: Under this insurance arrangement scheme, the employee is both – the proposer and the life insured. For such arrangements, Form No. 300 is to be filled.

Key Takeaways

With the world gradually shifting from a company-centric to an employee-centric approach, employers have started paying more heed to the well-being of their employees.

Employer-employee insurance is beneficial for both parties. While it allows the employer to secure less churn, employees get the benefit of a hassle-free cover.

Given that the term covers several policy types, the benefits are varied, but the employee is the beneficiary, unlike in keyman insurance. Plus, these policies do not attract tax, a major disadvantage of the keyman plans.

At Plum Insurance, we offer a plethora of E-E plans for our customers. So be it group term life insurance or group health insurance plans, we have you covered.

Visit Plum Insurance to get an idea of all the plans available and provide the best protection to your employees today.

About the Author

Leave a Reply

Your email address will not be published. Required fields are marked *