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Insurance to Employees
Transcript of Insurance to Employees
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 &
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 Task Time How to reach Next goal
of Organization FAC T Grow Wealth Creation Is it created by
growing like a tree?
Identifying a right opportunity? What is the most appropriate answer? With less Tax burden How do you like a wealth created
which reduces the current tax-burden?
which makes your profits improve? reduce Worries How to reduce Worries of Organization
with satisfied employees?
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
Employer may finance a loan towards premium payment There is no restriction
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
Employer The employer can reward his chosen employees by way of taking policies under this scheme
whereas other benefits like
increase in wages
have to be given to all employees due to various statutory reasons WELCOME
on Employer-Employee Insurance Advantages
Employee The employer can retain his good and talented employees.
as the benefits of
may not be
available with other employer The insurance benefits will lead to
increase in loyalty towards the employer
boosts their efficiency and productivity The welfare nature of
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
is eligible for rebate under sec 37 of the Income tax act The maturity benefit will be paid
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
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
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
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