The Role of Insurance in Compensation Packages

Written by Mr Kapil Mehta, Co-founder,

Changing jobs is a major decision. Most look at the job role, compensation, location and industry when deciding to take up an offer. However, few ask the finer questions, such as those about insurance benefits that a company offers and even fewer negotiate those benefits. One reason may be the lack of information about Insurance Benefits in the initial interactions between companies and candidates. To initiate a discussion about this will prove beneficial as the Insurance that a company offers has a major role in your financial security. Considering companies cost-effectively procure better insurance than what you could do as an individual, you must understand the various segments of insurance that will be important for you. Some of which are discussed below.

Medical Insurance

This covers the cost of hospitalization, including physician and surgeon fees, hospital rooms, and prescription drugs. These benefits are delivered through group health insurance. Group health insurance comes with many advantages such as immediate cover for pre-existing diseases and cashless hospitalization payments. Employees get a sum assured based on their position in the company. You should determine the sum-assured of the health insurance provided by the employer and the family members covered in it. Some companies will charge you for the group health insurance but many will pay the cost and, in that sense, this forms part of your total compensation.

Some companies offer insurance to your parents. Senior Citizen insurance can expensive at an individual level, particularly if your parents have an ailment. The advantage of a company insurance is that parents will be insured even if they have chronic problems, and claims pertaining to those ailments will be paid. This might reduce the in-hand compensation you receive but adds to your overall benefit.

A common issue that comes up when you join a company is that the insurer takes a couple of months to add your name to the group policy. This means that an early claim could be rejected if an insurance endorsement is not completed. Make sure you get your e-mediclaim cards soon after joining. This is a way to ensure that your details have been recorded by the insurer.

Wellness and OPD Insurance

Some companies offer wellness benefits to employees. These could be in the form of an annual health checkup or participation in health camps focused on certain ailments. The company may also offer a sum of money for Out Patient or OPD expenses. The wellness benefits are not mandatory and so, if a company offers these, it does indicate that it is employee-welfare oriented.

Term Insurance

In the unfortunate event of the death of an employee while in service the term insurance policy provides the nominee or the next of kin a financial cover to help cope with the loss. This is particularly important when you are the primary earning member of the family. As an investor in term insurance ideally, the level of term insurance you should be about ten times your annual income. This is the time that it takes most families to become financially self-sufficient again. Most companies will offer term insurance that is 1 to 3 times your annual income. You must buy the remaining cover yourself to bridge the gap. The advantage of your company giving you term insurance is that the buying process does not require you to undergo a medical test or give any form of health declaration. Individual term insurances require medical tests and, if you are not healthy, may result in higher premiums. An important point is to have your nominee clearly listed in the group term so, if you die, the benefit is paid quickly to the right person.

Accident Insurance 

A group personal accident policy covers the employees against disability or death. The advantage of this insurance over a group term life is that it covers disability in addition to death. The disadvantage is that only death due to an accident is covered. Some companies will also add a restriction that death while at work or on company premises is insured. Read the terms carefully so you understand the insurance you have. For blue collar workers this insurance is vital but this is also relevant for white collar jobs.

Travel Insurance

If your work entails extensive travel you should ask about travel insurance, both international and domestic. Many companies will buy annual insurances that cover you anytime you travel. Medical expenses overseas can be prohibitive which is why this insurance is a must. The travel insurance should also cover pre-existing conditions to some extent.


Third-Party litigation insurance, also known as Directors and Officers’ (D&O) liability, is liability insurance that insures the liability of directors and officers if they are sued by a third party. Although the insurance is called Directors and Officers it does cover all executives that hold managerial positions. The insurance will pay for your legal defence and also the final award by the courts. In this insurance you must check if employment malpractices are covered. This pertains to situations where an aggrieved employee files a suit against you. If this insurance is not available then you could be asked to pay for your own legal costs. This insurance is particularly useful for senior executives and a must for Board members.

Employer-Employee Insurance

This is an insurance where the company buys insurance but the beneficiary is an employee. It is a benefit given by the company to select employees. The employer-employee insurance policy works as a reward program. An employer can decide the quantum of insurance based on your compensation, qualification, experience and potential. This is a tax efficient benefit because you can select products where maturity payments are not taxed.

Not all companies have these seven insurances but it is in your interest to get into the details of insurance when looking to change your job. Insurance can make a big difference when things go wrong.

Disclaimer: The opinions expressed in this article are those of the authors. They do not purport to reflect the opinions or views of Ad Astra or its members.