Hiring individual life insurance is an option that is increasingly valued by consumers that allows policyholders to offer economic security to their family if something happens to them. However, there are other options to take out life insurance other than privately. This is group life insurance , a type of insurance in which several people are insured under the same policy. In this article we will tell you what group life insurance for companies is, what its characteristics are and what advantages it has.
What is group life insurance
Group life insurance is a very advantageous type of life insurance for organizations and companies; as well as for those employers who want or must (in some sectors it is mandatory) take out a life insurance policy for their employees. These insurances, being closely related to the world of work, usually include coverage for death and absolute and permanent disability (due to accident or illness).
The main difference between individual life insurance and group life insurance is, of course, that group insurance covers a group, while individual life insurance covers only one individual.
But what are the advantages of having a single insurance for the same group of people instead of individual insurance for each one?
Characteristics and advantages of group life insurance
One of the main advantages of contracting group insurance is that the premium is proportionally cheaper than contracting individual insurance. In fact, your premiums can save up to 20% compared to buying individual insurance.
Another advantage highly valued by contracting group life insurance is that medical check-ups are not necessary. not necessary, but simply fill out a questionnaire on the insured person’s health and finances.
In addition, an inherent characteristic of group life insurance is that a general expiration date is established for the members of the group (which is usually between 65 and 70 years of age). This is established regardless of the age of each member at the time of contracting the insurance. This is a feature that is considered very interesting.
Some insurers also offer some complementary coverage. Among them, the following stand out:
- additional capital for accidental death
- total and permanent disability due to accident
- death due to work accident
- death due to traffic accident
In any case, this is something that depends on each company and what the insurer wishes to hire.
Another advantage of these insurances is that they can be contracted to insure a wide variety of groups. This is the case of associations, sports clubs, professional associations, state personnel and even debtors; to name a few.
Taxation of group life insurance for companies
Payment of premiums
Companies or employers that have contracted group life insurance for their workers can deduct the payment of the premiums. In this case, the premium is charged to the worker as payment in kind.
In order for the company to deduct the payment of group insurance premiums, the insurance policy must state that it implements pension commitments when the benefits are assimilable to those of a pension plan. On the other hand, the voluntary contributions of workers not linked to the pension commitment with the company cannot be instrumented in the insurance contract formalized by the company.
In addition, for the company to be able to deduct the payment of premiums, two more conditions must be met.
- There must be a transfer of the rights of the policyholder to the insured (employee as beneficiary) of benefits for survival, rescue and the designation of beneficiaries in the event of death
- the payment of collective life insurance must be mandatory by collective agreement.
Consideration of income from work
As group company insurance is an alternative system to pension plans, the contributions will be considered as full earnings from work paid in kind and the remuneration will not be deductible from the insured’s income tax base. In this sense, one of these two assumptions can occur:
- That the company deducts the contribution and the insured employee pays for it in his personal income tax, with the corresponding transfer of rights.
- That the company does not deduct the contribution. Therefore, there will be no tax imputation, regardless of whether or not there is a transfer of rights.
The payment of death benefits will be taxed by the ISD and not by the IRPF (which is how, for example, pension plans or insured pension plans are taxed pension plans are taxed ).
As for the benefits that are not a consequence of the death of the insured (in this case, the worker), these are included in the taxable base of the insured/beneficiary as full income from personal income tax work. In these circumstances two cases can occur.
- When the insured (the worker) has already paid taxes on the contributions, upon receiving the benefit he will pay taxes on the difference between the capital received and the premiums paid.
- When the insured (the worker) does not pay taxes until the moment of receiving the benefit, then he will pay taxes for all the benefits when receiving said benefit.