Employer Employee Insurance Scheme

Employer employee insurance scheme is a valuable asset for businesses, offering financial support to employees during health emergencies. This coverage not only aids in retaining a skilled workforce but also enhances the company's reputation. To prioritize their employees, forward-thinking organizations should consider providing this insurance, as it brings various advantages for both the employer and the workforce. Read on to learn more about this beneficial scheme.

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Whom do you want to insure?

  • Employee, spouse & kids

  • Employee only

What is an Employer Employee Insurance?

An Employer-Employee Scheme is a health coverage option purchased by employers for their workforce. This policy serves as a valuable employee perk, ensuring financial security during medical emergencies. Beyond retaining current staff, it becomes a tool to attract new talent, fostering business growth.

You May Also like to Read: Group Health Insurance Importance for Employees and Employers

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  • Employees
  • Employees & their family
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Minimum lives should be 7

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Include maternity coverage

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The E-E Insurance Policy provides financial protection not only for employees but also extends to cover their family members. The scope of coverage varies, encompassing accident-related injuries, medical emergencies, hospitalization costs, and other specified expenses. In essence, Employer-Employee Insurance serves as a means to provide a financial safety net for the health and well-being of the entire team.

Employer-Employee Scheme – Eligibility

For eligibility under E-E insurance scheme, the employer must be: 

  • Sole proprietorships
  • Corporates, corporations, and conglomerates
  • Partnership firms
  • Public and private companies
  • NRIs working at MNCs registered in India
  • MSMEs
  • Companies facing financial difficulties and losses
You May Also like to Read: Health Insurance Trends for Employees

Employer-Employee Scheme – Benefits for Employer

The benefits that an employer gets with the E-E Insurance scheme are as follows:

  • Employee Well-being: Providing insurance coverage secures employees financially during health uncertainties, fostering a positive relationship between employers and employees and boosting workforce motivation.
  • Retention Boost: Health coverage makes employees feel cared for, reducing the likelihood of them seeking opportunities elsewhere. This contributes to lowering the attrition rate within the organization.
  • Talent Attraction: Showcasing Employee Health Insurance as a significant perk can attract potential employees, as many candidates prioritize good medical coverage when choosing a workplace.
  • Enhanced Productivity: Premium Employee Health Insurance Policies often include preventive healthcare support, such as fitness apps and medicine discounts. These initiatives can lead to improved employee lifestyles and increased long-term productivity.
  • Tax Benefits: Employers can enjoy tax exemption by declaring the premium paid for the Employer-employee Policy as a business expense.

Employer-Employee Scheme – Benefits for Employees

  • Medical Coverage: Employees included in the policy receive insurance coverage for medical emergencies and illnesses, subject to the specified terms and conditions.
  • Family Coverage: Employer-employee Insurance might encompass the family members of an employee, such as dependent parents, children, and spouse, contingent on the terms outlined in the policy.
  • Accident Protection: The GPA policy provides financial protection to covered employees against injuries or death resulting from accidents. In the unfortunate event of accidental death, the nominated family member receives the compensation amount.
  • Cashless Services: Covered employees can access cashless services at any hospital within the insurer’s network. This convenient service allows policyholders to receive healthcare without upfront payment, as the settlement occurs directly between the insurer and the hospital.
You May Also like to Read: Group Health Insurance Stipend to Employees

How does Employer Employee Scheme Work?

The Employer-Employee Insurance Scheme functions by offering comprehensive health coverage to all members of the organization. Employers procure group life or health insurance plans for their employees without deducting any amount from their salaries. It's a perk provided by the company, meaning employees don't have to contribute financially to access health insurance for themselves and their families.

Think of it as an inherent benefit integrated into your total compensation package (CTC), with the employer covering the premium costs. In return, employees enjoy the benefits of medical or term insurance without any deduction from their paychecks. Additionally, many companies extend additional benefits like super top-up and personal accident insurance under their group master policy.

For instance, the following summarizes the common plan types typically offered as part of corporate insurance coverage in India:

  • Group Cover: This includes a comprehensive group medical health insurance plan, offering coverage to all members or teams within the company.
  • Group Term Life: It provides term life insurance coverage to employees through a single policy.
  • Group Personal Accident: This scheme safeguards employees against accidental injuries, covering temporary total, permanent partial, or full disabilities.
  • Super Top-up: An optional rider that enhances the sum insured beyond the basic medical plan.

Employer-Employee Scheme - Tax Benefits

Tax Benefits for Employers: As outlined in Section 17(3) of the Income Tax Act, the premium paid by employers for employees' health insurance falls under "Profit in lieu of Salary." Therefore, employers can consider the premium amount as a business expense, making it eligible for tax benefits. In simpler terms, the annual premiums of Employer-employee Policies are treated as general business expenses, thus reducing the taxable amount.

Tax Benefits for Employees: Employees who contribute to the premium can also enjoy tax exemptions, as per the provisions of the Income Tax Act in India. Additionally, any monthly premium paid for opted top-up plans by an employee can also qualify for tax benefits under the IT Act.

Employer-Employee Scheme – Types of Arrangements

Under the employer-employee scheme, there are two types of arrangements:

Type A: Proposer is the Employer, and the Employee is the Life Assured

  • Utilize proposal form number 340, designed for insuring someone else's life, especially from LIC.
  • The policy must be allocated to the employee (policyholder) in accordance with the agreement between the employer and the employee.
  • The proposal should be signed by the person authorized through a resolution.
  • Submission of the company's accounts book or IT orders for the last three years is necessary to demonstrate profitability, as the premium liability lies with the organization.
  • A separate letter outlining the restrictions and the intended purpose of the insurance, as desired by the employer, should be obtained.
  • The employer commits to fully assigning the insurance policy to the employee after a specific period of continued employment, typically ranging from three to five years.
  • The employer can place limitations on the employee to discourage them from obtaining loans or surrendering the policy.
  • Even after the predetermined ownership period, the employer may continue paying premiums to avail tax advantages. If an employee leaves the job within the mentioned period, the employer can either surrender the insurance plan for its surrender value or completely assign it to the employee as part of terminal benefits.
You May Also like to Read: Reasons Why Your Employees are not Using the GMC

Type B: Employee is both the Life Assured and Proposer

  • Use the proposal for life insurance for oneself, such as form number 300 when obtained from LIC.
  • The employee acts as the owner without any imposed restrictions.
  • No requirement for policy assignment through the employer.

Conclusion

The Employer-Employee Insurance Scheme is a crucial component for businesses, providing financial support to employees during health emergencies and offering a range of benefits for both employers and the workforce. The scheme enhances employee-employer relationships, aids in retention, attracts talent, and promotes overall well-being. With tax benefits for both employers and employees, customizable coverage options, and eligibility for various types of businesses, the Employer-Employee Insurance Scheme emerges as a valuable and versatile tool in fostering a healthy and secure work environment.

Frequently Asked Questions

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Group Health Insurance Premium Calculator

Who do you want to insure?

  • Employees
  • Employees & their family
icon

Minimum lives should be 7

  • 1 Lakh
  • 2 Lakh
  • 3 Lakh
  • 4 Lakh
  • 5 Lakh

Include maternity coverage

Premium starts from

(Excluding GST)

Let's find the right plan for you

Speak to our experts to get the right plan for your company's needs

icon Expert advice made easy icon
  • Date
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When do you want a call back?

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Written By: PolicyBazaar - Updated: 19 March 2024

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4.3 April 01, 2023
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4.3 March 24, 2023
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4.3 March 15, 2023
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4.3 February 04, 2023
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Policybazaar's efficient claims process was impressive. In case of any medical emergencies, my employees were able to get their claims settled swiftly, allowing them to focus on their health and recovery without worrying about financial aspects.Thankyou
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