Employer - Employee Insurance Scheme

• Definition: The Employer-Employee Insurance Scheme is designed to provide financial security for employees and their dependents in case of untimely demise, old age, or other unforeseen circumstances.
• Purpose: Employers may opt for this scheme to offer employee welfare, retention incentives, and additional benefits to select employees as a reward for their service.
• Coverage: This policy can include life insurance, disability benefits, hospitalization, and pension plans, depending on the employer’s chosen structure.
• Policy Ownership: The policy may be taken in the name of the employee, with the employer paying the premium. The policy is generally assigned to the employee at an agreed-upon time.
• Premium Payment: Employers may fully or partially cover the premium. If paid by the employer, it can be treated as a perquisite for taxation purposes.
• Tax Benefits: Under Section 17(2)(v) of the Income Tax Act, premium payments by the employer can be considered taxable perquisites for employees, while employers can claim it as an expenditure.
• Assignment & Restrictions: The policy should be assigned to the employee as per agreement, with any imposed restrictions not exceeding five years from the policy date.
• Risk Assessment: Employers must ensure compliance with financial underwriting norms, and thorough checks are done to eliminate moral hazard risks before approval.
• Flexibility: The scheme does not mandate coverage for all employees, allowing selective implementation based on employer discretion.
• Employee Benefits: This scheme secures the financial future of employees and enhances job satisfaction, loyalty, and retention.