Employer Employee Insurance Scheme
Employer Employee Insurance is a unique opportunity for the employer to reward his employee and get benefited at the same time. In the Employer-Employee insurance arrangement, both the employer, as well as the employee, are benefited at the same time.
How It Works?
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The employer purchases an insurance policy for the employee in either of the two arrangements given below.
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Type A – Employer is the proposer and Employee is the life assured.
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Type B – Employee is the proposer and life assured.
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The premium is paid by the employer in type A until the policy is assigned to the employee (usually within a pre-specified period).
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The employer can continue the premium payment even after the assignment, if he wishes. Otherwise, the premium payment has to be continued by the employee.
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The maturity amount and death claim shall be available to the employee/nominee, if the policy has been assigned to the employee by the employer.
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As the employer does not have any control over the situation in type B arrangement, usually type A is the preferred employer-employee insurance arrangement.
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Employee/Employer can avail tax benefit under section 80C
Before Assignment
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Employee quits the job: Employer can either surrender the policy and get the surrender value or absolutely assign the policy to the employee as a part of his terminal benefits.
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Death of the Employee: The death benefit has to be passed to the nominee of the employee unless it is specifically mentioned in the agreement.
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Policy matures without being assigned to employee: Maturity proceedings shall be received by the company but will be treated as the income of the company and will be taxed and TDS will be applicable.
After Assignment
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Employee quits the job: Employee is the owner of the policy and he should pay the future premiums(if any) and can enjoy the maturity proceedings. Maturity amount will be tax free u/s 10(10D) of IT Act.
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Death of the employee: Death benefit amount shall be available to the nominee of the employee only and will be tax free u/s 10(10)D.
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Policy Matures: Maturity amount received by the employee and is fully tax free u/s 10(10D).