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Employers should progress past basic monetary compensation because both performance expectations and workplace responsibilities are changing rapidly in the present business climate. Providing group life insurance demonstrates the most significant way employers can show their dedication toward employee welfare. The provision of group life insurance policies creates dual benefits by comforting staff members and their families while enhancing your employer brand through responsible human resource strategies.
When initiating a term insurance policy through group scheme implementation, there are essential factors that require examination. This post provides all the necessary information about plan structure and financial, along with emotional advantages for your organisation.
1. Understand the Type of Group Life Insurance You Need
The first step is identifying which type of group life insurance is best suited for your organisation. For example, brands like Aviva offer various plans:
- Aviva New Group Term Life Plan is ideal for employer-employee setups offering annual renewable term coverage.
- Aviva Group Credit Life caters specifically to institutions providing various types of loans.
- Aviva Group Gratuity Advantage Plan is made for companies looking to manage gratuity liabilities while offering life cover.
Each plan is built for specific use cases. Understanding your organisation’s structure and employee demographics will help you choose the right one.
2. Evaluate the Coverage and Sum Assured
A term insurance policy under a group setup should offer coverage based on the employee’s income or grade. The sum assured can be tailored to the needs of each member.
Minimum coverage starts from Rs. 5,000, with no upper limit (subject to underwriting). For example, employees in higher job bands can receive higher cover amounts, ensuring they and their families are adequately protected.
3. Check the Flexibility of Premium Payment Options
Some plans offer premium payment terms such as single pay and limited pay benefits, which enable employers to structure their plans based on their financial capabilities. Insurers grant organisations the autonomy to select premium payment frequencies between monthly, quarterly, half-yearly, and annual schedules.
4. Tax Savings for Employers and Employees
One of the most significant financial benefits of offering group life insurance is the tax advantage. Both the employer and employees can enjoy deductions under the Income Tax Act, 1961.
Let’s take an example using the Aviva Group Gratuity Advantage Plan:
- Employee A has a monthly salary of Rs. 80,000
- Annual income = Rs. 9,60,000
- Without tax-saving investments, A falls under the 20% tax bracket
- The employer contributes 8.33% of the annual salary (Rs. 9,60,000) = Rs. 79,968 to the Gratuity Fund under this plan
1. For the Employee:
The employer’s contribution to the gratuity fund does not directly reduce the employee’s taxable income in the current year. However, gratuity payments received by the employee at retirement or upon leaving employment are tax-exempt up to certain limits under Section 10(10) of the Income Tax Act.
Employee’s Taxable Income:
- Without Gratuity Plan Contribution: Rs. 9,60,000
- With Gratuity Plan Contribution: Rs. 9,60,000 (no change in taxable income).
Employee’s Tax Payable:
- Income from Rs. 5,00,001 to Rs. 9,60,000: Tax at 20% = Rs. (4,60,000 × 20%) = Rs. 92,000
Total Tax Payable by Employee: Rs. (12,500 + 92,000) = Rs. 1,04,500 (excluding cess).
The employee does not get any immediate tax savings due to the employer’s contribution to the gratuity fund in this scenario.
2. For the Employer:
The employer can claim a deduction under Section 36(1)(v) of the Income Tax Act for contributions made to an approved gratuity fund.
Employer’s Taxable Income Reduction:
- Employer’s contribution to gratuity fund = Rs. 79,968
- This amount is deductible from the employer’s taxable income as a business expense.
Employer’s Tax Savings:
Assuming a corporate tax rate of 25%, the employer saves:
Tax Savings = Contribution × Corporate Tax Rate
= Rs. 79,968 × 25%
= Rs. 19,992
5. Look for Death and Disability Benefits
Basic group life insurance should cover natural and accidental death. Brands like Aviva offer additional riders that extend coverage:
- Terminal Illness Benefit (Aviva Group Credit Life)
- Accidental Total Permanent Disability (ATPD) Benefit
These benefits ensure that even in the case of partial or full disability, employees are financially secure, and the outstanding liabilities (especially for loan-takers) are covered.
6. Minimum Group Size and Eligibility
Group term plans have specific entry conditions. For example, some plans require a minimum of 10 members or 50 members.
Age limits also vary, with most plans covering from age 18 up to 70 or even 79 years depending on the plan.
7. Financial Security for the Organisation
For institutions or NBFCs offering loans, group term insurance secures their portfolio by ensuring the loan is repaid in the event of the borrower’s death or disability.
This plan also allows for Lender-Borrower schemes where, in the event of death, the claim amount goes directly to the lender first, and the balance goes to the nominee—adding an extra layer of financial protection for the business.
8. Zero Maturity Benefit – Pure Protection
Most group term insurance plans are pure protection plans with no maturity or survival benefits. That said, the minimal premiums make these plans cost-effective for both employers and employees while fulfilling the core purpose—life protection.
9. Easy Administration and Renewal Process
Plans are simple to manage with digital onboarding and renewal support. Premiums can be automated and certificates of insurance (COIs) are issued per member. This simplifies HR processes and ensures compliance.
Conclusion
The provision of group life insurance shows what you genuinely value about your employees and their dependents. Brands allow all businesses across startup and large-scale enterprises to access flexible term insurance policies through group plans which provide affordable protection for your second family at work.
The correct insurance selection and tax awareness enables organisations to create both safer working conditions and establish advanced financial practices.
*Standard T&C apply
*Tax benefit is subject to change as per tax laws
*Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
