Image Group Gratuity Insurance Plan - Gratuity Policy/Scheme for Employees

The Benefits of Group Gratuity Insurance

Long Term Investment And Market Linked Returns

Investment of gratuity fund in unit linked investment portfolio will reduce business costs. A good plan will help you reward your employees well without a financial impact on your business.

Comprehensive Cover

Group Gratuity Scheme creates gratuity benefits for the employees. It can also provide death benefits and financial security to the family members of the employee insured under this scheme.

Extends Tax Relief To The Employer & Employee

Annual gratuity contribution by employers is an expenditure for tax calculation. Gratuity income is exempted from tax up to a limit specified and subject to conditions under section 10(10).

Fast Claim Settlement

Claim settlement with us is easy and prompt. We have dedicated claim experts who tackle claim requests promptly and make the process hassle-free and seamless for our partners.

Quick Guide to Group Gratuity Insurance

Definition of a Group Gratuity Insurance

Group gratuity insurance plan helps an employer to meet their statutory liability towards gratuity. As per the Payments of the Gratuity Act, an employer is liable to pay a lumpsum for every year of service rendered by the employee. A gratuity plan helps cover this liability by managing a provision fund and insuring the death of an employee. A regular payment towards the gratuity provision fund enables better fund management and also attracts tax benefits.

Employees are eligible to get 15 days salary for every year of service rendered in accordance with the Gratuity Act 1972. The formula to calculate the gratuity is ' 15/26 ⨯ last drawn monthly basic salary ⨯ Number of year of service in continuation '

Functioning of a Group Gratuity Insurance

An employer chooses to invest a certain amount of money to be able to meet the organization’s gratuity liability. This amount is then invested in a range of equity and debt funds to provide returns over a long period of time. The lump sum amount created in this process is then used to pay gratuity claims for employees who exit the organization.

Services provided under a Group Gratuity Insurance

Below are a few services that are part of the group gratuity policy:

To the employee-

  • Death Benefits are payable only if the policy is in force
  • Maturity benefits are payable on retirement or resignation of an employee

To the employer-

  • Loyalty additions based on fund value are possible in case the policy is in force
  • Tax benefits get accrued on regular annual contribution made towards the gratuity fund
  • Help manage organizations cash flow in case of bulk resignations

Eligibility criteria for a Group Gratuity Insurance

Below are the eligibility criteria for obtaining a group gratuity insurance for employee benefit:

MetricsMinimum ValueMaximum Value
Age of entry18 years75 years
Age at policy renewal-80 years
Group Size10 membersNo limit
ContributionRs. 10,000No limit

Charges Applicable Under the Group Gratuity Insurance

  • Fund Management Charge: This is the charge applicable as a percentage of the value of assets. Fund Management Charge is calculated as percent per annum on the Fund Value. The rate of this charge may increase but usually remains below 1.5% of the total fund per annum.
  • Premium Allocation Charge: These charges are levied to offset the insurance companies spend on distributor fee, underwriting expenses as well as medical expenses of the policy.
  • Policy Administration Charge: These charges are deducted as administrative charges incurred by the insurance company for maintenance of the policy.
  • Mortality Charge: This charge is levied as a charge for the insurance protection on death before the end of the assumed life expectancy of the insured.
  • Surrender/Termination Charge: This is a charge deducted for pre-mature encashment of the group gratuity policy either partially or fully.

Process to obtain a Group Gratuity Insurance

The first step in putting together a group gratuity plan is to get an actuarial valuation of accumulated liabilities. The second step is to identify a suitable insurer who will manage the plan. Insurers can be selected based upon the past returns generated by the gratuity fund. The third step is to set up a trust and put the gratuity plan in place.

Gratuity policy payment in case of death of an employee in service

There is no minimum eligibility period for gratuity payment in case of death or disablement. As per the Gratuity Act, gratuity is payable to the nominee of an employee irrespective of the completion of 5 years of service in case of death of an employee. In case of death of an employee, the gratuity is calculated based on the tenure of service of the employee. However, the amount can be maximum 20 lakhs. Along with the gratuity fund, the nominee also receives other dues such as salary benefits, statutory bonuses, etc. in case of death of an employee on service.

Implications of Future Service on Gratuity

Future Service Gratuity plan works as an insurance. They resemble a life insurance plan wherein death benefits are provided to the nominee. Employees covered under such a group gratuity policy taken by a company are eligible for gratuity payment till retirement. This essentially means that, the gratuity benefit received by the nominee will be calculated for a future period, till the retirement age of the employee (if they had survived).

Frequently Asked Questions

Gratuity is a monetary amount that is paid to an employee of an organization under the Payment of Gratuity Act, 1972 as a token of appreciation for his/her service to the organization.
Gratuity has an insurance component associated with it. The Future service gratuity is equivalent to an insurance. The gratuity fund also has a compulsory life insurance cover associated with it.
As per Gratuity Act 1972, gratuity is mandatory for all employers to pay to their employee on exit from the firm. It is also mandatory that the employer pays the gratuity amount within 30 days of exit from the organization or pay interest on the amount, to the employee, for the days of extension of payment of the gratuity fund.


How is premium calculated for Group Gratuity policy?

Gratuity is given by the employer to the employee in lieu of the services rendered during the period of employment. Here, we’ll get to learn the criteria for the premium calculation of the Group Gratuity policy. Usually pays the gratuity at the time of retirement but can also pay earlier, provided below conditions meet...
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What are the various charges applicable to Unit Linked Group Gratuity Plans?

The purpose of a Unit Linked Group Gratuity Plans is to provide the employees a lump sum benefit on their exit. This benefit is called gratuity. When a policy holder goes for a group gratuity plan from an insurance provider, he is levied with the following charges:

Fund Management Charge:

It is the charge applicable as a percentage of the value of assets...

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What are the statutory requirements for Payment of Gratuity?

The sum of money paid to the employee by his/her employer for rendering the services for a long period in the company is known as gratuity.

However, there are certain statutory requirements that one must adhere to while paying gratuity to their employees. These are:

1. It is paid to employees who have completed at least 5 years in the company....

Read More

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