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Employer- Employee Insurance

Plans

This product is underwritten by Tata AIG Life Insurance Company Limited


Tax benefits are as per current tax legislations and are subject to amendments made therein from time to time.
Tata AIG Life Insurance Company Ltd. (Reg. No. 110), Peninsula Towers, 6th floor, Peninsula Corporate Park,
Ganpatrao Kadam Marg, Lower Parel, Mumbai 400013
Insurance is the subject matter of the solicitation

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Objective

• To understand the concept of employer-employee insurance.

• To understand benefits of the same.

• To understand tax treatment of the same.

• To be aware of the documentation process for the same.

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What is employer-employee
insurance?

• Employer buys insurance for one or more employees.

• Employer pays the premium.

• Employer enjoys tax benefits.*

• The policy under employer-employee can be purchased only on the


life of the employee.

*Tax benefits are as per applicable tax legislations and are subject to amendments from time to time
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Benefits

• An HR initiative for the employees.

• An employee friendly gesture which promotes a feeling of


satisfaction.

• Helps in reducing attrition.

• Employer continues to pay premium, till employee is working with


company.

• Income Tax Benefits on premiums paid by the employer.*

*Tax benefits are as per applicable tax legislations and are subject to amendments from time to time
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Scheme A
• Employer is the applicant and policyholder.

Employer: Employee:

Pays the premiums Is the insured


Is the applicant and policy holder
Gets the benefits accruing from the death of the
employee

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Scheme A - continued

• Only Term Plans can be sold under this scheme.

• As employer is policy holder; any benefits arising from death of the


employee will accrue to employer.

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Scheme A – FAQ’s
1. In case of death of insured, the sum assured is payable to?
B. Under Scheme A, sum assured is payable to the employer.

2. Who is the policyholder?


E. Policyholder is the employer.

3. What happens if the employee leaves the organisation?


A. The policy lapses as the employer-employee relationship no longer exists.

4. How does this scheme benefit the employer?


A. In case of death of a key employee, the employer gets a sum assured which
can be used to offset the losses arising out of sudden loss of the employee.

5. Who will be the nominee in this case?


N. Nomination will be left blank in the application form.

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Tax treatment

• Premiums paid by the company are eligible for deduction u/s 37(1) of the
Income Tax Act, 1961.*

• Death benefit is taxable in the hands of the employer.

*Tax benefits are as per applicable tax legislations and are subject to amendments from time to time
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Documentation and
underwriting

• Application form –

– Employer signs as applicant

– Employee signs as insured

• While filling application form- correspondence to Business address has to be


ticked in the application form.

• Letter from the employer on letterhead is required in Tata AIG Life format

• Standard underwriting rules regarding; age proof, medicals will apply.

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Other aspects

• All correspondence including the policy document will be sent to the


employer.

• No restriction on the number and type of employees who can avail of


this scheme.

• The renewal premium has to be paid by the employer.

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Scheme B

• Employee is the applicant and policyholder.

Employer: Employee:

Pays the premiums Is the insured and policy holder.


His nominee will get the death benefits of the
policy.

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Scheme B

• Employee is the applicant and policyholder.


• All plans can be sold under this scheme.
• Renewal premiums have to be paid by the employer.
• If the employee leaves the company; he / she employee is liable to
pay future premiums.

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Scheme B- FAQ’s

1. In case of death of insured, the sum assured is payable to?


B.Under Scheme B, sum assured is payable to nominee of the
employee.

2. Who is the policyholder?


E.Policyholder is the employee.

3. What happens if the employee leaves the organisation?


A. The employee can continue paying the premiums and the policy will
continue.

4. How does this scheme benefit the employer?


K.It is an HR initiative for the employer and can help retain employees

5. How does this scheme benefit employees?


N.The employee gets an insurance policy without paying for the same
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Scheme B- FAQ’s Continued
6. What are the tax implications?
A. For the employee the premium is treated as a perquisite.
For eg. If the employees gross income is Rs. 3,00,000 and the employer pays a
premium of Rs. 15,000 for Mahalife the taxable income will be Rs. 3,15,000.
However the employee will also get a deduction of Rs. 15,000 u/s 80 C of the
Income tax Act. If the Rs. 1,00,000 limit under Section 80 C is not exhausted;
the net effect on employee’s income is NIL

7. Who will be the nominee in this case?


A. The employee is free to nominate any person of his choice as the nominee.

8. Who gets the maturity benefits?


J. The maturity benefits belong to the employee.

9. Is the maturity benefit / death benefit taxable in the hands of the employee /
nominee?
A. The maturity benefit / death benefit are tax free. 14
Tax Treatment
• Premiums paid by the company and treated as perquisite in the hands
of the employee are eligible for deduction u/s 37(1) of the Income-tax
Act.*

• The premiums paid are treated as a taxable perquisite in the hands of


the employees.

• Employee can claim deduction u/s 80 C or 80 D for the premium paid


by the employer and charged as perquisite.

• Maturity benefits are exempt u/s 10 (10D) in the hands of the


employee and the Death benefits will be exempt under section 10(10D)
in the hands of the nominee.
*Tax benefits are as per applicable tax legislations and are subject to amendments from time to time
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Documentation and
underwriting

• Application form –

– Employee signs as applicant and insured

• While filling application form- correspondence to Business address


has to be ticked in the application form.

• Standard underwriting rules regarding; age proof, medicals will


apply.

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Disclaimer

You will appreciate that tax advice given earlier is not binding on the
income-tax authorities and there can be no assurance that the income-
tax authorities will not take a position contrary to that expressed above.
Furthermore, tax laws are subject to change from time to time, which
may adversely affect the advice that we have given. Before using this
opinion, we suggest that you seek professional advice from your tax
consultants / Chartered Accountants.

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