Employer Employee

When an employee takes insurance on the life of its employees, it is known as Employer-Employee insurance. The employer himself may pay the premium or he may finance loan to employee towards payment of premium. There is no restriction on the minimum or maximum number of employees to be covered under employer –employee insurance. The employer can be any reputed company or partnership firm.

Employers have an insurable interest in his employees and vice versa. On this primary consideration alone, provided there is total absence of the moral hazard element in any given proposal, insurance cover on employee’s life can be granted. There will be many reasons for employers to have his employees live covered but the main reasons for granting insurance will be as follows:-

• • • An enlightened employer may like to make provision as a welfare measure through life insurance for the dependents of the employee in case of employee’s early and premature demise and old age provision for the employee himself. This may constitute one of the service benefits.

    • An employer may hold the life insurance policy as a sufficient inducement or encouragement for the employee to continue with him since the employer has to spend considerable amount of money and time to train a new employee and moreover upon exist of such an existing employee, the employer may lose some of his trade secretes.

    • An employer may desire to give certain additional benefits to his select band of employees, as a reward of good services and who could not be otherwise compensated

ADVANTAGES TO EMPLOYER 

• • • The employer can reward his chosen employees by way of taking policies under this scheme whereas other benefits like group            insurance , medi-claim insurance, increase in wages have to be given to all employees due to various statutory reasons.

    • The employer can retain his good and talented employees. The employees will remain longer with the employer because the benefits of employer-employee scheme may not be available with other employer.

    • The insurance benefits will lead to increase in loyalty towards the employer which will boost their efficiency and productivity.

    • The welfare nature of employer-employee insurance will enhance the image of employer in the minds of employees, clients and other           shareholders.

    • The premium paid by the employer shall be an expense for the employer and should be eligible for rebate under sec 37 of the Income tax act.

ADVANTAGES TO EMPLOYEES

• • • The maturity benefit will be paid to employee because the policy shall be assigned in his favour.

    • In case of unfortunate death of employee the death benefit will be given to employee’s family.

    • Since premiums will be paid by employer, there is no fear for lapsation of policy.

    • The premiums will be eligible for rebate to the individual employee under sec 88 of Income tax act. The maturity and death benefit will be exempt from tax. However, premium shall form a perquisite in the hands of the employees under sec 17 of income tax act.