Group Gratuity Scheme
It is a known fact that the Gratuity Liability tends to increase with time as the salary and the tenure of the employees increases. An employer can pay out the gratuity proceeds from his current revenue (on a PAYGO basis) but this can cause financial strain at times. Thus, a prudent and tax efficient way of meeting Gratuity Liability is to ascertain the Liability, set up a Gratuity Fund and pay contributions as and when required.
The Insurance Companies offer two kinds of plans- a Guaranteed return Plans and Market Linked plans. A company contributes towards its liability which is invested by the Insurance Company to generate returns on the corpus. This plan offers interest income or market linked returns which gets credited to the policy at the end of financial year. The interest amount once credited to the policy account will become guaranteed. However, with market linked plan the returns are depicted through growth of NAV and the value of the corpus at the end of the financial year is considered for the purpose of valuation. Hence, you build a Gratuity Fund systematically, benefiting from investment returns which are safe and stable and thus provide the benefits in a cost effective manner. The liability of Life Insurance Company Limited at any time will be limited the balance in the policy account.
Key Features of Group Gratuity Plan
A few of the key features of the Group Gratuity scheme offered by the Life Insurance Companies are mentioned as follows:•
Members can be added at any point of the yea
r.
* Guaranteed interest rate/ Market Linked Plan – Insurance Companies offer two kinds of Plans- Fixed Interest Rate and Market Linked plans. The Market Linked Plans have a variety of schemes- Debt Funds, Equity Funds and balance of two.
* Built-in Insurance arrangement for the employees for future service-On death of the life insured during the term of the policy while in service before the retirement age, the sum assured, along with the gratuity benefit, under the basic plan is payable, provided the policy is active.
Fund management under the Fund Managers- Guaranteed Return/Market Linked Plans are being managed by the team of Fund Managers who invest the funds based on the option opted by the Insurer.
Claim settlement on exit as per company rules/gratuity act- The formula is defined by the act and the settlement is done in accordance to the same. In some cases, settlement can be according to the rules laid down by the company.
MIS related to Income Tax and trusts accounts and Actuarial valuation- Every Company has to get the valuation of the Liability as a statutory requirement since it is part of the Balance Sheet.
The insurance premium paid towards the Group Gratuity scheme is treated as deductible business expenses to the company.
ENTITIES TO WHICH THE GRATUITY RULE APPLIES
Generally, every factory and establishment pay gratuity to its employees for the services rendered to it. However, the gratuity rules do not mandatorily apply to such entities which have less than 10 persons and the number of employees for this purpose are counted as an average of the last 12 months.
WHEN IS AN EMPLOYEE ENTITLED TO CLAIM GRATUITY
1. On leaving the job : One of the occasions when an employee is entitled to claim gratuity is on the termination of his employment. There can be many reasons for this such as retirement/voluntary retirement, resignation, sometimes the employer may terminate the employee (not for some bad conduct of the employee as in this case the employee may lose his chance of claiming gratuity) or sometimes the employee may find some better opportunity so he might opt for a job-switch.
2. Death or permanent disablement : The other circumstance where an employee can claim gratuity is in case of his/her death or disablement which renders him permanently incapable of working in that company forever. However in such cases the Income Tax has relaxed the five years criteria, therefore an employee can claim his/her gratuity even if he/she has worked for less than five years. In case of death the nominees of the employee is given the gratuity. If case of the nominee being a minor, the amount of gratuity shall be deposited with the controlling authority. Controlling authority deposit/invest the gratuity amount in a financial institution or bank for benefit of minor, as may be prescribed, until such minor attains majority.
FORFEITURE OF GRATUITY
The employer may even forfeit the gratuity to which an employee may be entitled to if he leaves his job after 5 years if the company suffers any loss on account of the employees fault or negligence.
CALCULATION OF GRATUITY
Calculation of gratuity depends upon two variables:
• Salary
• Superannuation
In calculating the gratuity fifteen days salary is given for every completed year and as the number of working days in a month is considered to be 26 only (excluding the Sundays) therefore the formula for calculating the gratuity would be:
Formula : Last drawn salary x 15/26 x Completed years of Service (including a part of year in excess of six months)
In case of an employee working in a seasonal establishment he shall be paid gratuity at the rate of 7 days wages for each season.
WHEN THE EMPLOYER APPROCHES A LIFE INSURER
There are two ways an employer may pay gratuity to his/her employee, either from his own funds or he may approach a life insurer to purchase a group gratuity plan. When an employer opts for the latter, he has to pay annual contributions as decided by the insurer. However, the employee is also free to make contributions to his gratuity fund. The gratuity will be paid by the insurer based upon the terms of the group gratuity scheme.
TAX TREATMENT OF GRATUITY
Gratuity is not entitled to any exemption from tax. When an employee receives gratuity it would be taxable under the head ‘Income from salary’. And when the employee is entitled to gratuity on account of his death it would be fall in the hands of his/her nominee and would be charged under the head ‘Income from other sources’. For the purpose of calculation of exempt gratuity, employees may be divided into 3 categories
• Government employees : They are fully exempt from receipt of gratuity.
• Non-government employees : covered under the Payment of Gratuity Act, 1972: Maximum exemption from tax is least of the 3 below:
1. Actual gratuity received;
2. Rs 10,00,000;
3. 15 days’ salary for each completed year of service or part thereof
Gratuity in case of disabled employee
If an worker or employee becomes disabled due to a disease or an accident and as a result is not be able to perform the task which he/she was performing prior to such disability, however, is re-employed on some other task/job on reduced wages, he/she shall be paid gratuity as follows:
• For the period preceding the disablement: On the basis of last drawn wages by the employee at the time of disablement.
• For the period subsequent to disablement: On the basis of last drawn reduced wages by the employee at the time of termination of employment.
GRATUITY NOT A SUBJECT OF ATTACHMENT
Gratuity offered to an employee is exempted from being attached in case of a decree against the employee as from a Civil or a Criminal Court, as a decretal amount or fine, as the case may be.
Mediclaim Policy
A POLICY FOR MEDICAL EMERGENCIES : Blessed are those who enjoy good health. But life has its own twists and turns. A medical emergency does not send you advance notice---it can brew up very gradually or come when least expected. This is where a Mediclaim policy steps in. Since medical costs are very expensive these days, a Mediclaim policy provides you medical cover and takes this worry off your head should you fall ill or a mishap occurs. We all buy Mediclaim or want to buy a Mediclaim Policy but are we sure we have a right plan for our family? With the coming of several health insurance companies, India has witnessed a revolution in medical covers and here it becomes important to understand the New Generation Mediclaim Plan.
Regular exercise, meditation, right eating habits, positive attitude, meaningful work and short walks all add up to big benefits when it comes to your health. These little habits can bring about a big and positive impact on your well being. However, not all people are blessed with a right regimen and many people do not follow a healthy lifestyle these days.
At Security Insurance Brokers (SIB), we pray and hope you will follow a healthy daily schedule but should you by any chance fall ill or a mishap occurs, remember---the grace of GOD is like a right medical insurance plan. It will help you in your time of need. It is important to understand that the right time to buy a Mediclaim policy is while you are still healthy. The premiums while young and healthy are low. However, no matter what age you are, many routine and critical diseases nowadays are not linked to age. Major ailments like kidney, cancer, heart attacks and many more have been found in youngsters. As per a 2005 Report of the National Commission on Macroeconomics and Health, Ministry of Health & Family Welfare, GoI, 38 million deaths occur each year in India due to non-communicable diseases (NCD) in India, which account for 60% of all deaths. In India, roughly 5.8 million people die each year of NCDs like diabetes, cancer, stroke, heart and lung disease. According to the GOQii India Fit Report 2019, since last year, there has been a rise in the number of lifestyle diseases among young people (below 45 years) overall. Since last year, the percentage of cholesterol among Indians has increased from 10.1% to 14.1%, 34% of the population has high blood pressure running in their families and a sizable percentage of Indians are at high risk for diabetes.
This is why should things go wrong by any chance, if you take a Mediclaim policy you will have a cover that you can rely upon. A Mediclaim Policy is usually for a pre-specified, limited sum and covers only 24-hour hospitalisation expenses; diagnosis, treatment and day care towards a specific illness/disease. The new generation Mediclaim policies come with a host of features, benefits, advantages and coverage's. These are the things that you should focus on when buying a Mediclaim policy and not the cost or the premium. At SIB, we guide you and help you choose the right Mediclaim policy from a host of insurers that we are associated with. Well versed with the details of different Mediclaim policies from several health insurers, we will help you choose an appropriate Mediclaim policy for your individual and family needs.
Should you hold a Mediclaim policy and are dissatisfied by it, we also assist you in porting the policy to another health insurer offering overages that you desire. Portability is a facility which allows health insurance policyholders to transfer their insurance coverage from one insurance company to another without losing any benefits that customers have accumulated with the first company. In the past, prior to IRDAI’s regulations regarding portability, when customers ported or transferred coverage from one insurance company to the other it would have resulted in losing the waiting period for coverage of pre-existing disease benefits. After the new IRDAI regulations are in force, IRDAI protects customer’s right to port or transfer the policy to any insurance company and has laid down regulations that the new insurer "shall allow for credit gained by the insured for pre-existing condition(s) in terms of waiting period". This is applicable not just for one insurer to another but also from one plan to another with the same insurer.
Features
RESTORE BENEFIT
A plan which restores your Sum Insured when you need it the most. Instant addition of 100% Basic Sum insured on complete or partial utilisation of your existing policy Sum Insured Cumulative Benefit if applicable during the policy year. This total amount (Basic Sum Insured, Cumulative Benefit and Restore Sum Insured) will be available to all Insured Persons for all claims under in-patient benefit during the current policy year.
HEALTH CHECK UP
To help you keep track of your health status, a preventive health check-up is offered at regular intervals opted by you irrespective of your claim status.
CUMULATIVE BONUS
This is an amazing Restore Benefit that comes with a never-before renewal incentive. Normally, in most Mediclaim policies, if you have had claim-free years, the insurer will increase your Basic Sum Insured (SI) maximum by 50%. In a new generation plan the cumulative bonus can go beyond 100% in some of the cases.
LIFELONG COVER
Renew your cover lifelong and stay insured forever.
NO SUB-LIMIT ON ROOM RENT
With this Mediclaim plan you can get the room you like and the treatment you deserve without a hassle within the sum assured limit. A new generation plan does not have such limits. You can avail the plan without the hassle of a sub-limit.
CASHLESS TRANSACTIONS
This policy enables you to get treated on a cashless basis across thousands of hospital and hundreds of cities.
NO CLAIM-BASED LOADING
in this policy, there is a loading of your renewal premium because you availed a claim or fell ill during the policy period.
QUICK CLAIM PAYMENT
When it comes to claim settlement, SIB will help you get the claim in the shortest possible time for a genuine claim.
TAX BENEFITS
You can get tax benefit for the premium amount under Section 80 D of the Income Tax Act.
PRE- AND POST-HOSPITALISATION EXPENSES
The old generation plans provide 30/60 days cover but in the new generation plans 60/180 days cover is provided.
DAY CARE PROCEDURES
All day-care treatments are covered.
DOMICILIARY TREATMENT
Covered up to Sum Insured.
AMBULANCE COVER
Up to a certain limit subject to hospitalisation
ORGAN DONOR
Covered up to Sum Insured.
NO GEOGRAPHY BASED SUB-LIMITS
No matter where you buy your policy, you can get treated in any hospital or city of your choice with no additional co-pays or sub-limits.
MAJOR EXCLUSIONS
Any treatment within first 30 days of cover except any accidental injury.
Any Pre-existing diseases/conditions diseases like cataract, hernia, hysterectomy, joint replacement, etc. will be covered as per the specified period of the policy.
Expenses arising from HIV or AIDS and related diseases.
Abuse of intoxicant or hallucinogenic substance like drugs and alcohol
Hospitalisation due to war or an act of war or due to nuclear, chemical or biological weapon and radiation of any kind.
Non-allopathic treatment, congenital external diseases, mental disorder, cosmetic surgery or weight control treatments
ELIGBILITY
MAXIMUM AGE: The maximum entry age is 65 years.
MINIMUM AGE: The minimum entry age is 91 days. Children between the ages of 91 days to 5 years can get insured provided one of the parents has taken a policy.
The cover will be valid for one or two years as opted for. A certain discount is given on the premium by some insurance companies, if you opt for a 2-year policy.
An individual and/or his family members namely spouse, dependent children and dependent parents/parents-in-law are eligible for buying this cover on an individual or floater basis.
In a Unit Linked Insurance Policy, the cash you pay more only as costs arises into a pool called the Unit Linked Fund. This store is overseen by the insurance agency and is put resources into a scope of value and obligation instruments to offer you the double advantage of a Life Cover and a possibility to get most extreme advantages.
A Unit Linked Fund can be
separated into various individual parts called units.
Net Asset Value (NAV) is the cost of units of a reserve and is determined in rupees.
Reserve Value is the complete estimation of your premiums that are put resources into different assets of your decision.
It very well may be determined by utilizing the recipe,
Reserve Value = Total Number of units under an approach x Net Asset Value
For instance, on the off chance that you have 1000 units of a store for which
the NAV is '100, the reserve worth will be '1,00,000.
The advantage you will get toward the finish of the arrangement term is called Maturity Benefit. The Maturity Benefit will be equivalent to the Fund Value at the hour of development.
You ought to check:
All the charges deductible under your strategy, for example, approach assignment charges, finance the executive's charges and other such important charges Features and advantages of your arrangement, for example, dependability increments, premium instalment alternatives and all the more such significant advantages Limitations and avoidances under your arrangements like holding up period, lock-in period, previous sicknesses and all the more such applicable data.
Lapsation* of your arrangement and its hindrances
Other revelations
Illustrations demonstrating the advantages payable to you under endorsed situations of 4% and 8% returns.
*If you don't pay your strategy premium before the finish of the elegance time frame, all advantages gave under your approach will stop. This procedure is called arrangement lapsation . Elegance Period is the additional time given after the premium due date to pay your premium. It would be ideal if you allude your approach record or item leaflet to know more.
The cash paid in case of a terrible occasion relies upon upon the kind of the strategy. On the off chance that you have a One Pay policy* your friends and family will get the Death Benefit, equivalent to higher of An or B or C.**
On the off chance that you have a Limited Pay* or Regular Pay* strategy:
For passage age under 50 years, Death Benefit is the higher of (A+B) or C.
For passage age more prominent than or equivalent to 50 years, Death Benefit is the higher of An or B or C
** Where:
A = A fixed sum called the Sum Assured including Top-ups, assuming any and decreased by any fractional withdrawals+
B = Fund Value including Top-up Fund Value, assuming any
C = Minimum Death Benefit#
These decisions are:
One Pay Policy: Policies where you need to pay the premium just a single time
Limited Pay Policy: Policies where you need to pay premiums for a set number of years and not for the whole length.
Regular Pay Policy: Policies where you need to pay premiums for the whole term of the strategy
#Here, the base passing advantage will be 105% of all premiums paid.
*Some of the ULIPs offer you the decision of premium instalment term.
+Partial withdrawals are permitted after the fruition of five strategy years gave monies are not in DP Fund. You can make a boundless number of incomplete withdrawals as long as the aggregate sum of fractional withdrawals in a year doesn't surpass 20% of the Fund Value in an arrangement year. The fractional withdrawals are liberated from cost. DP Funds allude to Discontinued Policy reserve and comprise of cash from slipped by approaches.
A switch is a choice to move your cash among value and obligation reserves. You can utilize the switch alternative just on the off chance that you have picked the Fixed Portfolio Strategy^ in your Unit Linked Insurance Policy. It is relevant just on target that you have just put resources into the current assets. To move your new premiums into an alternate store, you can utilize the superior redirection administration.
^Fixed Portfolio Strategy is an alternative utilizing which you can deal
with your cash by putting resources into your preferred value and obligation
assets.
With Premium Redirection, you can decide to put your future premiums in an alternate reserve. The premiums which were prior put will stay in indistinguishable assets from picked by you.
Indeed, you can withdraw+ a piece of your income whenever after finishing of five years. Be that as it may, the estimation of withdrawals in a year can't be over 20% of the store esteem. For instance, in the event that your reserve esteem is '1,00,000, at that point you can pull back a limit of '20,000 in the year.
+Provided monies are not in DP Fund. You can make a boundless number of fractional withdrawals as long as the aggregate sum of halfway withdrawals in a year doesn't surpass 20% of the Fund Value in an approaching year. The fractional withdrawals are liberated from cost. DP Funds allude to Discontinued Policy store and comprise of cash from slipped by arrangements.
Truly, you can stop your strategy by starting a give up demand. The charges for giving up your strategy fluctuate from item to item. On giving up your approach, you will get the Surrender Value which will be equivalent to your reserve an incentive on the date of giving up. No instalment will be made to you before the lock-in time of five years. While you can stop your approach before the arrangement term, it is fitting to remain contributed for at any rate 10 years to appreciate the most extreme advantages offered by your strategy.
The decision of getting your Maturity Benefit as equivalent yearly compensation outs over a time of five years is called Settlement Option.
Recovery implies encashing the units at the current NAV offered by the organization. This is pertinent in the event of Partial Withdrawals, Switches, Maturity, Surrender, Settlement Option or on an installment of Death Benefit.
The date on which your Life Cover starts is the date of initiation of your approach. This will be the date appeared in your arrangement authentication. On a similar date, the age of the life assured* and term of the approach are determined.
*Life Assured is the individual whose life is canvassed in the protection contract.
Customary Premium Policy is an arrangement wherein you decide to pay your premiums all through the approach term. The recurrence of premium instalment can be month to month, yearly or half-yearly, according to your benefit.
is the date on which your excellent instalment is expected. For instance, on the off chance that your approach's date of initiation is January 4, at that point your month to month premium due dates will be February 4, March 4, etc.
In any case, on the off chance that the date of the beginning is January 31, at that point the following month to month premium due date will be the last date of each schedule month, for example, February 28/29, etc.
*Some of the ULIPs offer you the decision of premium installment span. These are:
Limited Pay Policy: Policies where you need to pay premiums for a predetermined number of years and not for the whole span.
Regular Pay Policy: Policies where you need to pay premiums for whole
term of the arrangement
Spread Cessation (date of
development) is the date on which your strategy arrives at its development or
the date when your arrangement span closes. On this date, your Maturity Benefit
gets payable to you.
Any investment made directly or indirectly in the stock market is not sure to offer returns. Returns depend upon the performance of the fund that customer’s money is invested in.
Any refund of premiums is applicable only within 15 days of receipt of policy document. However, insurance companies might deduct a part of the premium as various fees and charges before reimbursing the amount.
Most insurance companies offer a free-look period of 30 days to customers.
Some part of your premium goes into unit investment. This depends upon the type of ULIP product and varies from company to company.
Yes. Customers can freely switch between funds as per their wish and convenience. However, a certain switching charge is applicable and levied by insurance companies.
Yes. Top-up facility is available and is subject to features of the ULIP scheme that you have availed.
Yes. Insurance providers are expected to furnish annual reports, market scenarios and other fund related analysis and risk control measures to customers.
There are no partial withdrawals allowed for pension and annuity plans. For other plans, a partial withdrawal is generally allowed from the 5th year onwards.
As per a directive, all ULIPs offer guaranteed returns as laid down by IRDA. The returns are payable upon the ULIP’s maturity.
The entire premium amount is used to buy units. The quantum of units bought depends on the ULIP and the year.
ULIPs usually charge a premium allocation charge and a mortality charge.
A mortality charge is levied on ULIPs to cover the cost of insurance. The charges vary depending on the coverage type, age of the policyholder, health etc.
If you fail to pay the premium within the first 3 years of the policy, insurance cover is immediately discontinued. For premiums not paid after 3 years, the surrender value is paid and the contract is terminated.
A regular premium policy is one where the premium is paid throughout the policy term. Payments can be made monthly, quarterly, half-yearly or annually, depending on the policy.
Yes, as per an IRDA directive, ULIPs can be surrendered upon payment of a surrender charge.
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Charges:
Unlike traditional insurance policies, ULIP schemes have a list of applicable charges that are deducted from the payable premium. The notable ones include policy administration charges, premium allocation charges, fund switching charges, mortality charges, and a policy surrender or withdrawal charge. Some Insurer also charges "Guarantee Charge" as a percentage of Fund Value for built-in minimum guarantee under the policy.
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Risks:
Since ULIP (Unit Linked Insurance Plan) returns are directly linked to market performance and the investment risk in the investment portfolio is borne entirely by the policyholder, one needs to thoroughly understand the risks involved and one’s own risk absorption capacity before deciding to invest in ULIPs.
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• Providers:
There are several public and private sector insurance providers that either operate solo or have partnered with foreign insurance companies to sell unit linked insurance plans in India. The public insurance providers include LIC of India, SBI Life and Canara while and some of the private insurance providers include Aegon Life, Edelweiss Tokio Life Insurance, Reliance Life, ICICI Prudential, HDFC Life, Bajaj Allianz, Aviva Life Insurance,Max life insurance , Kotak Mahindra Life, and DHFL Pramerica Life Insurance.
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Tax Benefits:
Investment in ULIPs is eligible for tax benefit up to a maximum of Rs 1.5 lacs under Section 80C of the Income Tax Act. Maturity proceeds are also exempt from income tax. There is a caveat. The Sum Assured or the minimum death benefit must be at least 10 times the annual premium. If this condition is not met, the benefit under Section 80C shall be capped at 10% of Sum Assured while the maturity proceeds will not be exempt from income tax.
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Flexibility
:
ULIP schemes offer flexibility that is not just applicable to one aspect of the policy but is comprehensive in nature. Following are the kinds of flexibility that you get to avail with your ULIP schemes.
• Life cover can be chosen
Life cover that comes with the insurance part of ULIPs can be chosen by customers depending upon their financial capabilities.
• Premium amount can be changed
After a certain period of time, almost all ULIPs provide their customers option to change the premium amount. This amount can either be increased or decreased by customers depending upon their current financial status. Top-up facility is also offered by most ULIP schemes so that customers who want to maximize their gain can invest higher additional amounts whenever they want.
• Riders can be opted for
Riders are additional benefits that can be availed by paying a marginally higher premium. Examples of such riders are a critical illness rider, major illness rider etc. ULIPs allow customers to avail additional optional riders for added benefits and enhanced protection.
• Fund option can be chosen
ULIPs are insurance policies where a part of your money is put into an investment avenue like mutual funds, stocks, bonds etc. Most insurance providers offer customers the flexibility to choose the fund type in which they want their money to be invested. These funds range from aggressive to conservative variants so as to cater to the need of almost all kinds of customers.
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Transparency
:
Transparency is one of the key features of ULIPs. Unlike other investment tools, ULIPs offer high flexibility to customers and hence they control their ULIP policies to a good extent. Clear benefits and features, illustrative brochures and free-look period make sure that customers are doubly sure before they start investing in their ULIP schemes.
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Liquidity
:
ULIP schemes offer liquidity to customers depending upon the insurance provider from which they have been availed. Most insurance companies offer a lock-in period of 3 or 5 years after which customers are free to make either full or partial withdrawals.
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Multiple Benefits out of a Single Scheme
:
The best feature of ULIPs is that these policies offer not juts insurance benefit but also an avenue for people to grow their money through investment in shares and funds. This investment tool is ideal for customers who have a lower risk appetite but want to grow their money, nonetheless.
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Tax Benefits
:
ULIPs offer not only protection and returns but also tax exemption under section 80C of the Income Tax Act for life insurance and health insurance plans and under section 80D for life insurance and critical illness riders. Also, ULIPs are a great way to save in a disciplined way and to also ensure growth of the saved amount.
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Risk mitigation
:
Since ULIPs invest money in various funds and also offer protection, these products are low-risk investment tools. These policies are great for customers who wish to avail the advantage of market growth without actually participating in the stock market.
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Death and Maturity Benefits:
:
Following are the death and maturity benefits associated with ULIPs. These benefits are central to any ULIP policy irrespective of the insurance provider the scheme is availed from. The benefits may however, slightly differ from one insurance company to another.
• Death Benefits
Death benefits of ULIPs are offered in case of unfortunate demise of the policyholder. Generally, death benefit is equal to the sum assured plus fund value. However, depending upon the cause of death (accidental or natural) death benefits may vary.
• Maturity Benefits
Maturity benefits are offered to policyholders when the policyholder survives beyond the maturity period. Maturity benefits are equal to the amount of fund value. However, certain insurance companies may offer additional benefits subject to policy terms and conditions.
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Claim Process :
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Group Life Insurance
