As a company, should I buy keyman insurance for my employees or group term life is better?

—Rini Sharma

The objectives of both plans are different. Keyman insurance is meant to protect regular cash flows of a company due to death of a key person like a chief executive officer or sales head. Sudden demise of a keyman could lead to loss in clients’ confidence or disruption in ongoing projects. This may impact revenues. Proceeds from keyman insurance helps the company to absorb such shocks better.

A group term life plan is a financial security for the family of the employees. In case of death of the employee, the family receives the sum assured. This provides the family a replacement of the earnings provided by the employee to meet family expenses and liabilities. You should buy keyman insurance only for select employees. A group term life insurance plan is generally offered as a uniform benefit to all employees.

I am 45 years old and the sole breadwinner of the family. My son is 10 years old and my spouse is 40 years old. We have a family health plan, for which I am the proposer, for a sum insured of Rs5 lakh. Is it enough? None of us have any diseases as yet.
—Ken Verghese

An appropriate amount of sum insured for health insurance depends on age, health, the hospitals in your vicinity or the hospital you are most likely to visit, and the kind of room you would get admitted to. For example, a cataract can cost Rs10,000 to Rs1 lakh depending on these factors.

If you live in a large metro, then Rs5 lakh for the entire family is insufficient. Cancer treatment, which is among the most expensive diseases to manage, can cost up to Rs15 lakh or more. That’s the minimum that you should buy over time. If you find this expensive, consider a top-up plan where you pay for initial costs but large expenses over a certain threshold are paid for by the policy.

What is the advantage of buying critical illness benefits as a rider instead of a stand-alone critical illness plan?

—Alka Roy

There are two advantages of buying a critical illness cover as a rider.

First, the medical underwriting on the proposed insured would be done only once, in case of a rider. Otherwise, depending on the age and sum assured, you may have to go through two medical check-ups.

Second, the rider premium in a life insurance plan would be fixed for the term of the plan. Premiums change with age for standard critical illness products by general insurers. This change may be either annual or increase in specific age brackets.

While considering various options for critical illness coverage, you should give substantial emphasis to the number of illnesses covered by the plan. Stand-alone plans may score better here.

Abhishek Bondia is principal officer and managing director,

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