Company Life Insurance as a benefit for employees
Company Life Insurance is today one of the most unknown and discreet Social Benefits for employees. Although a large number of companies – mainly those dedicated to high-risk sectors – already offer it, most employees overlooked it due to its low visibility.
However, interest in Life Insurance on an individual basis has not stopped growing in recent years, especially driven by the effects of the pandemic. Avoiding economic problems for the family or ensuring the future of the children in the event of the death of a parent are the main reasons.
Next, we delve into Life Insurance, its advantages from the company and the benefits for employees.
1. What is Life Insurance?
Life Insurance -also called Life Risk due to the risk of death- is a policy that protects the insured’s family in the event of his/her death or the insured himself/herself in the event of permanent incapacity or invalidity.
Before contracting it, the policyholder designates a beneficiary who will be the one who receives the compensation when he dies. The beneficiaries are usually the spouses or descendants, although ascendants and other relatives can also be designated.
Depending on the moment in which the compensation payment is made, the insurance can be:
- Whole Life Insurance: the payment of the capital designate in the policy is made immediately after the death of the insured.
- Temporary Life Insurance: a specific period is designate during which the insurance company will indemnify the policyholder in the event of death. The contract, therefore, has a term stipulated in the contract.
2. Group Life Insurance vs. Individual Life Insurance
Group Life Insurance
Company, collective or labor Life Insurance is the one that the company subscribes for a group of employees. The company can offer it in a Social Benefit format, assuming the total cost of the monthly policy until the end of the employee’s contract, or in a flexible format, making it easier for the employee to contract the policy individually through the company at a lower price. to the market.
Being a benefit without tax exemptions, the premiums would not be exempt from IRPF and could not be offer under the Flexible Remuneration model in any case.
By grouping several policies in a single contract, the company can achieve significant savings compared to contracting them separately. Specifically up to 60%.
Individual Life Insurance
Individual Life Insurance is the one that can be contract by any person. Without the need to do it within a company, with the freedom to choose a more specific and open coverage.
According to the UNESPA Study Somos Seguros, in 2020 there were 20 million insure persons between individual Life Insurance policies and company or group Life Insurance. Which is equivalent to about half of the Spanish population. A clear indication of the concern for unexpected situations of thousands of Spanish families.
3. What does Life Insurance cover?
Life Insurance offers 3 types of coverage:
- Death: covers the death of the insured.
- Absolute Permanent Disability (IPA): covers the declaration of disability. That does not allow the employee to perform any type of work.
- Temporary Permanent Disability (IPT): covers the declaration of disability that does not allow the employee to perform his current job.
Some insurance companies also include critical illness as additional coverage.
Depending on the policy, it is possible to combine these 3 types of coverage. The most frequent scenarios being: Death (cheaper coverage), Death + IPA (intermediate coverage) and Death + IPA + IPT (more expensive and complete coverage).
It is say that Life Insurance is pure life, when its coverage (Death, IPA or IPT) is for any reason. And they are mix when, in addition to life. They include coverage for accidents and/or work-related illnesses or include permanent disability.