When a company considers group life, accident and fixed-sum health insurance, the second question is almost always: “And how is it taxed?” The big picture is good news, and the honest answer is that the details always depend on the specific arrangement. This article is therefore worth reading together with your accountant – it was written for them too.
The big picture: company-paid premium, fixed-sum employee protection
The basic set-up is simple: the policyholder and premium payer is the company, the insured are the employees, and the benefit is a fixed-sum payout for defined events – an accident, a bone fracture, hospital days, surgery, a critical illness or a death. The mechanics are shown on the How it works page. Through a tax lens, the essence: under the current rules the premium can typically be provided as a benefit, and it may fit into the remuneration package as an element with typically more favourable tax treatment than wages – but that is not automatic; it is the result of a well-designed arrangement. Two questions are worth separating right at the start: what the benefit costs the company including public charges, and what it is worth to the employee – the two are not the same number, and that difference is precisely what planning is about.
Collective or per-person premium? A lot rides on this
Some group contracts work with a so-called collective premium: the insurer sets a premium for the entire insured circle that cannot be broken down to individual persons. In other arrangements the premium is identifiable per person. Under the current rules, the tax assessment of the two approaches can differ, and which one is more practical also varies by company – this decision is best made together with your accountant, before the quotes are even requested. So this is not a technical footnote but the cornerstone of the tax treatment; for the comparison with salary, our article Pay rise or group benefit is a good starting point.
What will the accountant ask for? The document list
Well-founded tax treatment stands on documents. Have these ready:
- the insurance contract and the policy, including the precise definition of the insured circle,
- the premium notices, premium statements and the bank records of premium payment,
- the benefits policy or the internal decision on who receives the cover and for what purpose,
- the list of insured persons and its change reports.
With these in hand, the accountant does not guess – they classify. It is good practice to place the documents in a shared digital folder in the very first month – so nothing has to be hunted down at year-end closing or in a possible audit. We have also collected the most frequent accountant questions in the accountant's cheat sheet.
How the process comes together in practice
The right order: first the goal and the insured circle, then the consultation with the accountant about the structure, and only after that the quote requests. As a broker, I prepare the variants so that your accountant can decide between real alternatives. And one important separation: the tax treatment of the premium and the taxation of the insurer's payout are two distinct questions – you can read about the latter in our article on the taxation of payouts. And the closing sentence is the same here as everywhere: it is worth clarifying the exact tax treatment with your accountant.
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