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Insurance to Employees

A presentation on how to approach a new automation project to help insure success.
by

Sriram NADIMINTI

on 19 March 2013

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Transcript of Insurance to Employees

What do you get? Attrition Employee
Satisfaction Business
Cycle Common Problems



faced by an Organisation Productivity Taxes What is the Solution? Increase
Salaries Can we increase
Salaries to all? Is this the only
SOLUTION? Employee-Employer Insurance Plans Allowed When a company takes a decision to Plan big for the employees of the organisation,
Such Companies What Are The Conditional
Assignments? Reliability &
Dependability
on Existing Employees What needs to be done? Q & A LIC Life Plus wishes a successful journey
to you and your Organization Why we are here?
W
T
W Task Time How to reach Next goal
of Organization FAC T Grow Wealth Creation Is it created by
growing like a tree?
attracting investments?
Identifying a right opportunity? What is the most appropriate answer? With less Tax burden How do you like a wealth created
with NO-TAX?
which reduces the current tax-burden?
which makes your profits improve? reduce Worries How to reduce Worries of Organization
with satisfied employees?
increased productivity?
reduced attrition? at the end of meeting 100% Trustworthy, Motivated and Self-Driven team TEAM Increase in Profits, Turnover When an Employer takes an Insurance on the Life of his / her Employees it is known as Employer-Employee Insurance Employer may himself pay the premium

or

Employer may finance a loan towards premium payment There is no restriction
on minimum
or MAXIMUM
employees covered under
Employer-Employee Insurance Reasons: make provision as a welfare measure through life insurance for the dependents of the employee

in case of employee’s early and premature demise
and / or
old age provision for the employee

This may constitute one of the service benefits Reasons: An employer may hold the life insurance policy as
sufficient inducement or encouragement

for the employee to continue with organisation,

since the employer has to spend considerable amount of money and time to train a new employee

and moreover upon exit of such an existing employee, the employer may lose some of his trade secretes. An employer may desire to give certain additional benefits to select employees,
as a reward of good services and who could not be otherwise compensated Reasons: Advantages
to
Employer The employer can reward his chosen employees by way of taking policies under this scheme

whereas other benefits like
group insurance
medi-claim insurance
increase in wages

have to be given to all employees due to various statutory reasons WELCOME
TO
AN
INTERACTIVE SESSION

on Employer-Employee Insurance Advantages
to
Employee The employer can retain his good and talented employees.
as the benefits of

employer-employee scheme

may not be

available with other employer The insurance benefits will lead to

increase in loyalty towards the employer

which in-turn

boosts their efficiency and productivity The welfare nature of

employer-employee insurance

will enhance the image of employer

in the minds of employees, clients and other shareholders The premium paid by the employer shall be an expense for the employer

and

is eligible for rebate under sec 37 of the Income tax act The maturity benefit will be paid

to employee

because the policy shall be assigned in his favour In case of unfortunate demise of the employee

the death benefit will be paid

to family of employee or the nominee(s) Since the premiums are paid by the
employer

there is no fear of

lapse of policy The premiums will be eligible for rebate to the individual employee under sec 88 of Income
tax act. The maturity and death benefit will be exempt from tax. However, premium shall
form a perquisite in the hands of the employees under sec 17 of income tax act

to check Employee will have increased status and will feel honored as it is for select people All type of plans is allowed under employer – employee insurance scheme Department circular dated 11/3/2006 ref: co/act/2062/4 &
As per co/ U and R/ 2/2007 dated 24/10/2007
co/ U and R/ CJP / 11-12 /104 dated 6/8/2011 while allowing insurance under employer- employee scheme , it should be ensured that the employee beneficial ownership in the employer company or ownership held by concerned employee, his/her spouse, minor children aggregated together are limited by the following:
Employee's shareholding in the company is <51%
Family's shareholding in the company is <71% QUANTUM OF INSURANCE The minimum/ maximum sum assured shall be determined in terms of the rules relating to financial underwriting for individual assurance taking into account the existing life insurance on the life of the individual Form no 340 should be submitted when employer is the proposer

- to be signed by
person authorized by the company as proposer with company seal
life assured.

The authorized person may preferably be a director of company. If employer may wish to advance loan (towards payment of premium) to the employee,

proposal form no. 300 may be used.

However, in such cases, policy may be assigned to employer as a collateral security and reassigned to the policyholder on redemption of debt Moral hazard is critical area and needs through examination before proposals are finally
accepted. MHR in prescribed form by respective authority. Since the proposal will be treated as individual proposal on the life of employees concerned,

irrespective of whether the proposer is employee or not,

requirements of medical examination have to be decided as per status of individual employee Taxation Aspects Premium paid
Income tax
Rebate The company- proposer/ employer under the policy can claim the premium paid under key-man insurance as bona-fide business expenses under sect 37(1) of the income tax act hence deductible from the profit before tax As per finance act 1996, the policy money received will become the income in the hands of
the company and taxed as income from the other source if policy is not assigned in favour
of life assured The premiums will be eligible for rebate to the individual employee under sec 88 of Income tax act.

The maturity and death benefit will be exempt from tax.

However, premium shall form a perquisite in the hands of the employees under sec 17 of income tax act As per condition of scheme, if the employer is the proposer, the policy shall be assigned to the life assured soon after it is issued.

At the proposal stage, separate letter from the employer stating
1) the object of insurance
2) that the employer will assign the policy in favour of the Life Assured
3) the restrictions he desires to be considered in respect of surrender, loan etc, and

state clearly that the letter will form part of the proposal papers.

Generally, the assignment which will be executed by employer after issue of policy will be of
absolute nature transferring all the right, title and ownership under the policy in favour of
employee/ life assured. Employer may assign the policy with a condition that in the event of life assured

leaving/ resigning his employment for any reason

except death before the normal retirement age,

the policy shall revert to employer with effect from date of
termination of his/her service. The above condition may be like in the event of life assured leaving/resigning from the company says

within 5 or 10 years from date of issue of the policy or before a date specified by the employer, the policy shall revert to employer.

After completion of said period, policy will be treated as assigned in favour of life assured
Full transcript