- Term life insurance is a prudent financial tool for companies looking to reward their employees
- Employer provided life insurance benefits not only the employee, but also the employer
- The proceeds from the policy go to the employee, but premium is paid by the employer
- The payout is exempted from tax u/s 10 (10D) of Income Tax Act
Companies all over the world face this challenge — talented employees know their worth and are also aware of the opportunities available in the job market. Not just that, any employee with good performance, who is not satisfied with the current workplace, always has better options to look forward to. Shortage of skilled labor only adds to the problem of retention.
Indian companies are no different. In such a scenario, it is in the interest of companies to keep their employees motivated and happy within their working environment. One of the tools that can be used to achieve this objective is employer provided life insurance. This arrangement, is gaining ground as the preferred tool for employee retention.
● What is Employer Provided Life insurance?
Employer provided life insurance is an arrangement where, the employer buys the life insurance plan and pays the premium for the benefit of the employee. Generally, this is a benefit given to only select employees by the company with the aim of attracting and retaining them for a long period of time.
This life insurance is often confused with keyman life insurance, as these are both brought by companies for their employees. But, employer provided life insurance is different in a way that the death benefit is paid to the employee’s beneficiaries and not the company. Furthermore, the life insurance proceeds to the employee are tax free u/s 10(10D).
● Who is Eligible?
A corporate entity, proprietorship firm or any other legal business with at least five employees are eligible for employer provided life insurance. Employees who are working on the payroll of companies meeting the eligibility criteria can be given this policy. For employees, the minimum age for this policy is 18 years and the maximum is 60 years.
● Benefits to Employers
This life insurance arrangement between the company and the employee is primarily designed for the benefit of the employee, but the employer stands to gain as well. The first benefit is that the firm gains the loyalty of the insured employee. Secondly, the attrition rate is lowered, and employee satisfaction increases.
In addition, the company also sees an increase in productivity as a satisfied employee also becomes a highly motivated employee and strives to improve his performance. The firm also benefits monetarily as it is entitled to get tax exemption on the premiums paid u/s 37(1) of Income Tax Act as business expenses.
● Benefits to Employees
There are several benefits that the employee enjoys when their employer buys life insurance cover for them. Here are a few:
● This life insurance cover acts as a morale booster for the employee, when he knows that the employer is taking an insurable interest in his life.
● The employee gets the benefit of the cover without paying for it.
● The death claim will be paid to the nominee appointed by the employee. This will give them peace of mind knowing that their family will be taken care of, even in their absence.
Exide Life Insurance offers some of the most affordable term insurance plans. Take a look at what’s on offer and if you like what you see, you can get a quick quote as well.