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Group insurance polices

GROUP INSURANCE
Group term life insurance is a type of life insurance that is available through many employee benefit programs. It provides a cash benefit in the event of the insured's death. Many term lifepolicies also offer benefits for a disability or severe injury. Life insurance is designed to help pay for final expenses for the deceased and to help the family maintain its current lifestyle and residence.


Benefits
Typically the cost of group coverage is less than if an individual purchases her own policy. Term life insurance provides cash benefits to the survivors of the insured in the event of her death to help provide for both funeral and continuing household expenses. Some policies offer a return premium benefit as well, in which the insured can get back all of the premiums paid at the end of the term (although this is relevant only for policy terms of ten years and up). Term life insurance coverage allows consumers to buy the greatest amount of coverage for the least money, and group insurance policies multiply these savings by bundling many policies together and buying in 'bulk.'


Types
Term life insurance is one of two types of life insurance options that your group plan may offer. The other is whole life insurance. While term life insurance provides coverage for a given length of time, whole life insurance is in continuous effect. Whole life policiesbuild cash value that can be borrowed against or cashed in at a later date. However, it is more expensive and because it is not in effect for a specific period, rates can go up at any time.

GRATUITY POLICY
As per the Payment of Gratuity Act 1972, an employer is obliged to pay gratuity to an employee after he/she has rendered a continuous service of atleast 5 years. Gratuity is payable to an employee on:

Normal retirement
Resignation/early retirement Death or
Disablement due to accident or disease (completion of 5 years of service is not necessary in such cases)


Employer/Trustee of the Gratuity Scheme shall fund for gratuity liability by: Remitting the recommended contribution for the past service and an annual contribution for the future service as per the actuarial valuation provided by company. Transferring existing assets if any to company Gratuity Scheme based on mutually agreed asset valuation. This fund is then invested with the insurance company under their gratuity policy so as to increase the monetary value of the fund so that the employee can get more than what he invests.



EMPLOYER- EMPLOYEE POLICY
Employer – Employee Insurance is not an Insurance product in itself but is an arrangement.  This arrangement is based on the principle that the employer has insurable interest in his/her employees. An employer can take multiple policies for more than one employee.

Employer – Employee Insurance – Where is it applicable
The Insurance is applicable where there is a relationship established between the employer and the employee, where in the employee earns a salary from the employer for the services provided to the employer.

1)    Sole Proprietorship  where the employee works( other than the proprietor)
2)    Employees of the partnership firms( other than the partner)
3)    Corporate employees ( other than the key person)
4)    Any legal entity as the employer and its employees.

Employer – Employee Insurance – Advantages
1)    Employer gains the Loyalty of the Employees
2)    Employee Retention can be achieved and is considered as Employee welfare measure.
3)    Employer’s tool to reward his/her employees
4)    Employees are financially protected with this policy.
5)    In case of untimely death of the employee his family will receive claim which will work as an alternate source of income

Employer – Employee Insurance – Options
Option 1
1)    Employer commits to pay the premium and the employee’s application form is accompanied by a letter from the employer
2)    The standard proposal form is completed individually by the employee
3)    Employee is the proposer himself and has the control over the policy as the owner of the policy.
4)    The premiums paid by the employer are treated as perquisites in the hands of the employee
5)    The premiums paid by the employer are treated as deductible business expenses.

Option 2
1) Employer is the proposer and retains to assign the benefits of the policy to the employee as defined in the scheme
2)  Employer takes the policy for the employee and pays the premium
3)  The premiums paid by the employer are treated as deductible business expenses.
4)  Employee doesn’t pay any tax till the policy is assigned to him/her or his/her family.
5)  The standard application form is signed by authorized signatory on behalf of the employer as part of terms and conditions of his/her employment.
6)  Authorized signatory of the employer can assign the policy in favour of the employee (on behalf of the employer).
7) The application form is accompanied by a letter from the employer stating the objective of Insurance, restrictions imposed regarding loans, surrender etc and that the policy would be assigned in favour of the employee.