The plan provides life cover for a group of employees, by paying a lump sum benefit to the beneficiary on the death of an employee. The plan is offered on a yearly renewable basis and is no bonus is declared in this policy.
In any company only a few individuals make the important decisions. The implementation of these decisions down the line makes or breaks the business. Thanks to their specialized knowledge, skills, vision and business acumen, these are the people who bring higher revenues, profits and loyalty. Skills of a person may not be replaceable, but the business can certainly compensate the financial loss by providing insurance to its key person - THE KEY MAN. The brand power of individuals can sometimes be bigger than that of their organizations. These are individuals who are the most indispensable human asset of an organization.
Thus, it is only natural that the sudden exit of such individuals (for whatever reasons) will not only cause financial distress but also a loss of goodwill - if not permanently, then at least temporarily - till such time that a suitable candidate of the same calibre is found, trained and acclimatized to the work culture of the organization.
Key-man insurance is a life insurance policy taken on the life of a key-man with a view to providing liquidity, financial strength and indemnity to the business organization in case of losses on account of death, absence or exit otherwise of its key-men from the business.
Old-age security is one of the key parameters of gauging the development of an Economy. With the advent of the concept of nuclear family and increasing longevity of human life the issue of old age security further demands higher attention. Life insurance Companies, however, have already taken steps on this path, introducing the superannuation schemes on group platform. GROUP superannuation schemes offered by insurance companies can be a good option for organizations to systematically plan for the increasingly crucial post-retirement days of their employees. A well-crafted plan can place a sizeable corpus in the hands of an employee Superannuation schemes, also known as pension or annuity schemes, are of two types - defined contribution and defined benefit.
Defined Contribution (DC): describes the annual contribution that the employer will deposit into the plan on behalf of each participant. (Here, only the contribution is defined, NOT the pension)
Defined Benefit (DB): defines the amount of the benefit that a participant will receive at retirement. (Normally in Govt. sector, a retiring employee knows how much pension he is going to get till he survives, irrespective of his deposits in Superannuation fund-a huge liability for the employer/Govt). Employees cannot carry DB scheme to the new employer.
As per “The Payment of Gratuity Act, 1972”, all employers with employee strength of 10 at the time of inception are statutorily required to pay gratuities to their employees. Gratuity shall be payable to an employee on the following events of his/her employment after he/she has rendered continuous service for not less than five years:
(a) On Superannuation
(b) On Retirement or resignation
(c) On death or disablement due to disease or accident.
Three ways to manage the Gratuity Fund
It makes sense to outsource it to a Life Insurance Company due to the following reasons:
a) Professional management of the fund, Better Investment avenues and hence better returns
b) Economies of scale (larger volume gets better rates)
c) Ease in administration
d) Total Transparency
e) Annual Actuarial valuation free of cost
f) Maintaining the Books of the Accounts of the Gratuity
g) Filing of Gratuity returns
h) Life Insurance Companies can also provide Life Cover as well as Future Gratuity Cover (anticipated Gratuity earned by the employee till his/her retirement) along with management of Gratuity Fund