What is employer-employee insurance?
An employer buys an employer-employee insurance policy to insure the life of their employees. Additionally, it is an arrangement that suggests that the employer has an insurable interest in their employees. Also, such an insurance policy encourages employees to stay with the employer.
Key Takeaways
The Power of Five: A business only needs a minimum of five employees to qualify for these specialized group insurance schemes, making it accessible even for small startups and legal entities.
Mutual Financial Gain: Employers benefit from tax deductions on premiums paid, while employees receive premium coverage (often better than individual plans) at no personal cost.
Insurable Interest: The legal foundation of these policies is the employer’s “insurable interest” in the employee’s continued well-being and productivity.
Talent “Cement”: These policies act as a powerful retention tool. By offering “win-win” benefits like parental inclusion or unrestricted room types, firms can significantly lower their attrition rates.
Simplified Enrollment: Unlike individual plans, the employer submits a single proposal form and a member list (with DOB and sum assured) to cover the entire team at once.
Where is Group Health Insurance applicable?
This group insurance policy is applicable where there is a relationship between an employer and their employees. Such an employer-employee insurance policy has a minimum requirement of five employees. Therefore, the following types of companies can purchase these policies provided they have over five people:
- Sole proprietorships
- Partnership firms
- Corporate employees
- Legal entities
In such insurance schemes, the employer pays the premium. The employer fills one standard proposal form. This is then submitted to insurers with a list of employees. Additionally, this list also has details such as the date of birth and specific sum assured required.
Benefits for the employer in an employer-employee insurance
- This group insurance policy helps employers attract and keep employees.
- The employer-employee insurance scheme comes with tax rebates for employers on premiums paid.
- Employees can go to good hospitals and get back to work fast.
Benefits for the employees in an employer-employee insurance
- This group health insurance provides security to employees against illness, accident/disability, and premature death.
- Employees get health cover benefits without having to pay for the same.
- The quality of cover in the group insurance is significantly better than an individual insurance.
Summary Table: Employer-Employee Insurance
Case Study: Helping employers and employees
Illuminations Ltd. is a Mumbai-based IT firm that provides cloud-based services and other software solutions to clients. It was set-up in 2002 and now has 67 employees.
Read More: Can You Buy a Group Insurance Policy for Your Group/Association?
Most of Illuminations’ clients are based in Los Angeles and Seattle. In order to cater to their client demands, Illuminations has a solid base of talented people in different departments. So, to cement its relationship with employees, the firm took an employer-employee group insurance policy. Further, the company customized the insurance to meet the group’s needs. For example, parents of the young workforce were also insured. Overall, the employer-employee health insurance plan proved a cost-effective method to offer high-risk cover. The company allowed all employees to use a single AC room with no restrictions whatsoever. And employees appreciated this benefit. The policy also helped the company get tax benefits and reduce its attrition rate. A win-win for employers and employees.
Frequently Asked Questions (FAQs)
1. Can a small partnership firm with only 6 people buy this insurance?
A) Yes. Any legal entity, including partnership firms and sole proprietorships, can purchase an employer-employee policy as long as they meet the minimum requirement of five employees.
2. Is the premium paid by the employer considered a taxable perk for the employee?
A) Generally, the premiums paid by the employer for group health insurance are not considered a taxable perquisite for the employee, while the employer can claim the premium as a deductible business expense.
3. What details are required to enroll employees in this scheme?
A) The process is streamlined. The employer typically needs to provide a standard proposal form along with a “Census List” containing the names, dates of birth, and the specific sum assured required for each employee.
4. How does this policy help in reducing “attrition”?
A) Attrition refers to employees leaving the company. By providing comprehensive security against illness, accidents, or premature death—and often extending these benefits to the employee’s family—the firm creates a strong incentive for staff to stay long-term.
5. Can the employer customize the level of comfort in the policy?
A) Yes. As seen in the case study of Illuminations Ltd., employers can choose to remove restrictions on room types (such as allowing Single AC rooms) or add specific riders to ensure the coverage meets the specific demographic needs of their workforce.
About The Author
Mayank Sharma
MBA Finance
He is a professional who brings extensive knowledge and expertise to the field of group health insurance. He has dedicated 7years to helping individuals and businesses navigate the complexities of insurance. Having worked closely with numerous clients and insurance providers, he deeply understands the nuances of group health insurance policies. With a reputation for providing insightful and informative content, he leverages his industry experience to educate readers about the importance of group health insurance and its benefits. Through their articles, Mayank Sharma aims to empower individuals and businesses to make informed decisions about their healthcare coverage, ultimately promoting healthier and more secure communities.
