Health Insurance for Small Businesses

What Is Health Insurance for Small Businesses and Why Should One Opt for It?

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Small businesses need to invest in their human resources to stay relevant in the market. Thus, small businesses need to focus on employee benefits as much as larger companies. One of the most effective and popular employee benefits is group health insurance. There are multiple benefits of investing in health insurance for small businesses. 

Meaning of Business Health Insurance

Business health insurance is group health insurance purchased by the business organization owner for the employees working for that business. A single health insurance policy document provides the same insurance coverage to each employee mentioned in the document. The sum insured is the same for each employee. The employer can also choose to include the family members of the employees in the group health insurance.

As per IRDAI, the minimum number of employees required to purchase health insurance for small businesses is 7 even though microinsurance plans are also offered for businesses having 5 or fewer employees. However, the minimum number of required employees to get business health insurance varies from one health insurance provider to another.

Benefits of Health Insurance for Small Businesses

Here are some of the major benefits of health insurance for small businesses.

Improve Hiring and Recruiting

Cash-in-hand of employees working in the SME sector is not enough to meet the expenses of unforeseen hospitalization. Health insurance for small businesses provides a sense of financial security to the employees against expensive medical treatment. As a result, talented employees are less likely to seek greener pastures. Thus, investing in health insurance helps small businesses in retaining talent.

Employee benefits package has become one of the major considerations of job seekers in the current times, and health insurance for small businesses is a major employee benefit. By prioritizing the health and well-being of the employees in the form of health insurance, a small-scale business can recruit a more talented workforce. Investing in business health insurance also helps in recruiting new talented employees.

Employee Job Satisfaction

Health insurance for small businesses promotes job satisfaction among the employees. This is because individual health insurance plans are often not affordable for employees in the small business sector, and a comprehensive health insurance coverage provided by the employer addresses their concerns about financial losses caused by hospitalization.

Other reasons are coverage from the first day of employment, coverage of spouse/children and other dependents, and cashless treatment in a wide range of network hospitals. All these benefits enhance job satisfaction. 

According to a survey, the highest job satisfaction among employees is generated by three main employee benefits: health insurance, paid time off, and retirement plans.

Lower Premiums

Health insurance for small businesses costs much less than individual health insurance plans. Premiums of group health insurance policies are low because the risk is divided over multiple people and the insurer’s liability is less. Thus, instead of purchasing health insurance for each employee, the employer can simply opt for group health insurance.

Overall, small businesses can avail low premium rates by opting for group health insurance.

Tax Benefits

Health insurance for small businesses comes with tax benefits. The small business owner can claim tax deductions on the premium paid for the group health insurance for the employees. 

The entire premium of group health insurance paid by the employer on behalf of the employees is eligible for tax deductions under Section 80D of the Income Tax Act. The premium amount can be claimed as business expenses. The tax deduction limit is Rs. 1 lakh each year. Such tax benefits have been defined as employer’s entitlement in the IRDAI Act 1999. 

In case both the employer and the employee pay the premium amount, both can claim tax deductions on the part contributed by each. The employee cannot claim tax deductions on business health insurance if the employer bears the entire premium amount. However, if the employee opts for add-on benefits to enhance the coverage by paying an extra premium, he/she can claim tax benefits on the additional amount.

Comprehensive Coverage

Pre and post-hospitalization expenses for treating illnesses and accident-related injuries are covered under health insurance for small businesses. These include room rent, diagnostic procedures, daycare, ambulance charges, and more. Critical illness cover to pay the expenses incurred on treatment of critical illnesses can also be provided by group health insurance plans. Group health insurance plans also offer maternity coverage for the delivery expenses and newborn baby cover.

No Waiting Period

There is no waiting period in health insurance for small businesses. This means the employees get coverage from day 1. Since individual health insurance plans require a certain waiting period before the policy is activated, the employees are more satisfied with group health insurance provided by the employer.

No Medical Checkups

Group health insurance does not require medical screening. The employees automatically get coverage as soon as the employer purchases a policy. This is particularly beneficial for the employees suffering from a pre-existing condition that prevents them from purchasing individual health insurance.

Easy Claim Process

Health insurance providers provide fast claim processing with negligible paperwork due to digitization. Thus, small businesses can raise claims easily. The employees can avail cashless treatment or reimbursement in the quickest possible time. Quick claim processing raises the reputation of the employer among the employees.

Promotes Healthy Company Culture

Health insurance for small businesses promotes a healthy company culture by establishing a relationship based on trust between the company and the employees. With their medical expenses covered, the employees are more financially empowered and motivated to work better. 

Helps in Business Expansion

Any small business looking to expand its operations needs a pool of loyal and hardworking employees. By providing financial security to the employees through health insurance, the company motivates the current employees to give their best and attracts new talent.


Health insurance for small businesses is a cost-effective employee benefit and in view of the above-mentioned benefits, must be considered by small business owners.

If you are searching for group health insurance for your organization, then you must check out Vital. It provides all of the above-mentioned benefits and more starting from just Rs. 299 per month per employee.

For more information, visit


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