Do insurers give keyman insurance to loss-making companies?

—Gaurav Arora

Conditions under a keyman insurance are based on the underlying reinsurance arrangement of the specific insurance company. Generally, keyman insurance is not issued in case the company’s profits/turnover is declining, unless there are special circumstances.

The aim of a keyman insurance policy is to compensate the financial loss that a company may experience in case of sudden demise or critical illness of its keyman. When a company is making loss, it is difficult to link the contributions of the keyman in the business and calculate the losses the company may incur in the event of the keyman’s death. Hence, the general rule is that keyman insurance is not allowed to loss-making companies.

However, depending on the nature of business and the training, skills and experience of the keyman, exceptions are made to this rule when contributions of the keyman in preventing further losses to the business can be proved. Some examples are companies in gestation period, new companies carrying forward business of partnership firms where the contributions of the keyman to the partnership firm can be linked. Such exceptions are made based on documentary evidence provided at the time of proposal and on a case-to-case basis.

My father is above 70 years. Should he buy an annuity plan?

—Shekhar Saran

I would advise an annuity plan for someone who is retired to ensure that regular expenses are covered by an assured flow of income. An annuity also protects the individual from interest rate fluctuations and the fear of exhausting saving reserves in case of a longer life. There are multiple annuity options, “annuity for life" and “annuity for life plus return of purchase price" being the two most popular options. Annuity for life is an assured income for life of the annuitant. Annuity for life plus return of purchase price offers annuity for life and upon death of the annuitant, the purchase price is returned to the nominee.

I have paid 72,000 for a unit-linked insurance plan (Ulip) bought in 2009. The premium-paying term is three years. The fund value at present is very poor. I have been asked to switch my fund. Should I continue or exit and take a term plan?


Ulips are goal-based and long-term instruments. They provide a range of opportunities—high to low exposure to equity—based on an individual’s risk appetite. Stay invested if you have planned to build this corpus to meet a long-term objective. Learn more about the fund switch and see if it aligns with your risk appetite.

I would also suggest that you revisit your financial goals, the risks that you envisage and check if you have the right amount of life cover. If your current cover isn’t between seven and 10 times your annual income, I would strongly recommend a term plan.

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