Complete Guide to Employee and Employer Insurance (2024-25)

Life is unpredictable, and although nobody wishes anything bad to happen ever, it is vital to take preventive measures.

Employee insurance benefits the employer provides can safeguard employees against unexpected medical and hospitalization expenses. Employer-employee insurance is a type of employee benefits insurance that is included in the overall compensation package.

In such schemes, the employer purchases the plan on behalf of the employee, with the latter being the beneficiary.

What is the Employer-Employee Insurance scheme?

The employer-employee insurance scheme is an insurance policy the employer provides their employees.

One example of employer employees insurance policy is an employee group insurance scheme. Other types include life insurance, critical illness insurance, maternity insurance, etc.

The benefits of the employer-employee insurance scheme are not just limited to health or medical insurance.Some schemes can cover accidental damages, travel medical insurance, and life insurance.

Employee benefits insurance provides better financial security to a company's workforce and is an excellent retention tool for management.

How Does an Employer-Employee Insurance Scheme Work?

The employer employees insurance policy is a comprehensive protection scheme intended to protect the health and wealth of your human capital.

Did you know that more than 7% of Indians are driven into poverty because of rising healthcare expenditures? Almost 30% of Indians not having health insurance of any type does not make the situation any better.

This became even more evident amid the COVID-19 pandemic and global health crisis. As a result, universal healthcare schemes have become the need of the hour.

The employer-employee scheme ensures better access to healthcare facilities for the employees and their family members. The employer or company usually fills the assigned form in the employee's name and pays the policy premium.

The framework of employer-employee insurance can be categorized into two types:

Type A

In this arrangement, the group insurance employees and members do not need to contribute to the payment of the premiums. The employer bears the entire expense, including the family coverage, on behalf of the employees. This is also known as a non-contributory scheme.

Type B

In the type B arrangement, the members or employees are liable to partially pay the premium to avail of the benefits. The employer deducts the other part of the premium from the employees’ total compensation package. This is known as a contributory scheme.

The table below sums up the basic structural difference between the two arrangements:

Employer-employee insurance is a type of comprehensive health coverage. The employer buys it as part of a Group Medical Cover (GMC) OR Group Personal Accident cover (GPA). Some schemes also allow add-ons to the Group Health Insurance.

What Are the Eligibility Criteria for Buying Employer Employee Insurance?

The employer-employee insurance scheme has some eligibility criteria the insurer must fulfill first. They are as follows:

• The employer should have at least five employees
• The employees should not have more than 51% of combined shareholding (including that of children, spouse, in-laws, parents, and relatives) in the company
• The employee must be a salaried individual with regular transactional service between them and the employer
• Any company, sole proprietor, private firms, and public sector organizations are eligible

Once you fulfill all these criteria, you are eligible to buy the insurance policy.

What are the Benefits of the Employer-Employee Insurance Scheme?

The employer-employee scheme is a much more comprehensive plan with much more varied insurance coverage than a keyman policy. It is a type of insurance that is paid by the employer and safeguards the key employee. However, upon the untimely demise of the employee, the benefits go to the employer. The employee insurance scheme, in contrast, can include various types of insurance plans that benefit the employees.

Here are some of the ways employee insurance benefits both the employees and the employer.

Benefits for Employer

• Employer-Employee Insurance Tax Benefit: Employers can claim tax rebates on the premium paid under section 37 (1) of the Income Tax Act, 1961.
• Upliftment of Health Work Culture: It helps provide financial protection to the employees during medical emergencies and lets organizations establish a healthy work environment.
• Better Financial Security for Employees: It provides financial assurance to employees in case of illness, accidents, disability, and even untimely death.
• Increased Employee Productivity: Many organizations can save on their premiums by implementing active fitness initiatives, such as discounts on medicines and the use of fitness tracking applications. This helps improve the quality of life of the employees tremendously.
• Comprehensive Insurance Coverage: Small and medium-sized enterprises (SMEs) can get employee insurance at lower premiums that offer coverage for rainy days.
• Lower Attrition Rate: Employees providing employee insurance benefits experience better retention.

Benefits for Employee

• Cost-Effective: A comprehensive insurance plan for employees that provides ample coverage at a low premium.
• Medical Insurance: Safeguards against emergency medical expenses due to illness.
• Cashless Facility:Employees covered under the employer-employee insurance policy can avail of cashless services at hospitals under the insurer’s network.
• Employer-Employee Insurance Tax Benefit: Under sections 80C and 10 (10D) of the Income Tax Act, employees can claim tax benefits on this.
• Family coverage: Employees can include their dependent parents, children, and spouse under the schemes.
• Accident coverage: It works as accident insurance for employees covered under the GPA policies in case of accidental injury or death.
• Term Life Insurance: Under certain schemes, it can act as whole life insurance, with the life insurance premium paid by employers for employees.

Is Employee Benefits Insurance Enough for Employees? [conclusion]

Employer-employee insurance is excellent basic insurance coverage to protect the health and well-being of employees. Whether the scheme covers basic health expenses or other add-ons, like accident insurance or life insurance, it is still a type of group insurance.

This means it will have the same limitations as employee group insurance, such as lack of control, employer dependence, and basic coverage.

Also, in case of losing a job, the insurance can get impacted if the employer is paying the premiums. In this scenario, the employer-employee insurance will seize to cover. Getting other individual insurance can provide the financial support you would require.

Should Employees Have Other Insurance?

It is advisable to get other insurance even if an employee is covered under employee-employer insurance. This is because the group employee benefits insurance will not cover beyond certain illnesses and conditions.

If you are in need of specialized procedures due to suffering from conditions not covered in the plan, then it will be a problem.

To avoid these, employees should get individual health and life insurance alongside the one provided by their employers. Also, job loss insurance provided by many general insurers can help in case you lose your job.

What Does the Employee Benefits Insurance Not Cover?

Although employee benefits insurance schemes are comprehensive plans, there are certain limitations to them, such as:

• Pre-existing conditions
• Self-harm or suicide
• Alternative therapies
• Experimental treatments
• Specific conditions not mentioned in the scheme