Everything you need to know about employer-provided life insurance

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Everything you need to know about employer-provided life insurance

Talented individuals are aware of their worth and the chances available in the employment market, which presents a challenge to companies all over the world. Not only that, any employee who puts in an outstanding job but is dissatisfied with his or her current company has better possibilities to choose from. The scarcity of competent workers exacerbates the difficulty of employee retention.

Companies in India are no exception. In such a situation, it is in the best interests of businesses to keep their staff engaged and happy at work. Employer-provided life insurance is one mechanism that may be utilized to attain this goal. This approach is becoming more popular as a means of retaining employees.

What is Employer-Provided Life insurance?

Employer-provided life insurance is a situation in which the employer purchases a life insurance policy and pays the premiums for the employee’s benefit. In general, this is a perk provided by a firm to a chosen group of employees with the goal of recruiting and maintaining them for a long time.

Because both are provided by employers for their employees, this life insurance is sometimes mistaken with keyman life insurance. Employer-provided life insurance, on the other hand, differs in that the death benefit is given to the employee’s beneficiaries rather than the firm. Furthermore, the employee’s life insurance profits are tax-free under Section 10 of the Internal Revenue Code (10D).

Who is eligible to participate?

Employer-provided life insurance is available to corporations, sole proprietorships, and other legal businesses with at least five employees. This coverage can be issued to employees who work on the payroll of firms that satisfy the qualifying conditions. Employees must be at least 18 years old and no more than 60 years old to be eligible for this coverage.

Employer Advantages

This life insurance agreement between the firm and the employee is largely for the employee’s benefit, but it also benefits the employer. The first benefit is that the company gets the covered employee’s loyalty. Second, staff churn is reduced, and employee satisfaction rises.

Furthermore, when a pleased employee becomes a highly driven employee who wants to enhance his performance, the organization experiences an improvement in production. The company also benefits financially since it is eligible for a tax exemption on premiums paid as business costs under Section 37(1) of the Income Tax Act.

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.