Group Medical, Keyman & Employee Insurance Advisory

Group medical insurance is a single master policy issued to an employer covering all eligible employees (and often their dependants) under one negotiated set of terms, priced on the group's overall risk experience. An individual health policy is underwritten and priced separately for each policyholder based on their own health history. Group policies are typically available without the pre-existing-disease waiting periods common in individual retail health policies, though this depends on the specific master policy terms negotiated, and cover usually ends (or converts to an individual policy at the employee's cost, if the insurer offers this) when employment ends.

Keyman insurance is a life insurance policy where the business is the proposer, premium payer, and beneficiary, taken on the life of an employee, director, founder, or partner whose skills, client relationships, or specialised knowledge are critical enough that their sudden death would cause a measurable financial loss to the business. It is not restricted to the most senior title — a technical founder, a client-facing rainmaker, or a specialist with irreplaceable domain knowledge can all be genuine keyman risks even without a top formal designation.

There is no single statutory formula. Common bases used in practice include a multiple of the keyman's annual compensation, an estimate of the profit or revenue attributable to that individual, or the estimated cost of recruiting and training a replacement over a reasonable transition period. Insurers typically also apply their own underwriting limits linked to the keyman's income and the company's financials. PNPC works through this with the company's actual financial data rather than defaulting to a round number picked without analysis.

Premium paid by a company on a keyman insurance policy is generally allowable as a deductible business expenditure under the Income-tax Act, on the basis that the policy protects the business against the financial loss of losing a person critical to its operations, provided the arrangement is genuine and properly documented — typically through a Board resolution recording the commercial rationale. On claim, the proceeds received by the company are generally taxable as business income, since the premium was allowed as a deduction.

A common practice is for the company to assign the keyman policy to the individual once they are no longer in a keyman role — for example, on retirement. At the point of assignment, the tax character of the policy changes: the company may need to account for the surrender value or the assignment as a taxable event, and the individual takes on the policy (and future premium responsibility, if any) in their personal capacity going forward, with the maturity or death benefit then potentially taxed differently in their hands.

Generally, premium paid by an employer for group medical insurance covering employees is not treated as a taxable perquisite in the employee's hands under Section 17(2) of the Income-tax Act, since it is a group insurance scheme rather than a direct personal benefit paid to or reimbursed to the individual employee. The specific tax position depends on how the policy and any employer contribution are structured, and we review this as part of the design process rather than assuming a blanket exemption applies to every variant of employee health benefit.

There is no statutory minimum headcount requirement to buy group medical insurance — some insurers offer group products for as few as a handful of employees, though minimum group size requirements and pricing vary by insurer. In practice, many businesses introduce a formal group medical policy around the time they make their first few hires beyond the founding team, both as a retention tool and because ad hoc reimbursement of individual medical costs becomes administratively unsustainable at that stage.

A room rent sub-limit caps the daily hospital room charge the insurer will reimburse, expressed either as a fixed rupee amount or a percentage of the sum insured. If the actual room booked exceeds this limit, many insurers apply a proportionate reduction to the entire claim — not just the room charge — under an 'associated medical expenses' clause, meaning a seemingly minor room upgrade can significantly reduce the total claim payout across all related expenses.

It depends entirely on the specific master policy negotiated with the insurer. Many group policies as standard cover the employee, spouse, and children; parent coverage (and in some cases parents-in-law) is commonly offered as an optional add-on, often at an additional premium borne either by the employer or partly by the employee through payroll deduction. There is no statutory requirement to include parents, so this is a design decision made at the time the policy is structured.

A TPA is an entity licensed by IRDAI that processes health insurance claims on behalf of the insurer — verifying hospitalisation details, processing cashless pre-authorisation requests, and settling reimbursement claims. Most group medical policies operate through a TPA rather than the insurer processing claims directly. Cashless claim rejections at the hospital counter are frequently a TPA-level pre-authorisation issue rather than a genuine policy exclusion, and can often be resolved or converted to a reimbursement claim with the right documentation.

Group Personal Accident insurance pays a lump sum (or covers specific medical/disability costs) on accidental death, permanent total disability, permanent partial disability, or in some policies temporary total disability of an employee — it does not cover illness-related hospitalisation, which is the domain of group medical insurance. Many businesses treat GPA as a lower-cost, complementary layer to group medical rather than a substitute for it, since the two respond to genuinely different risks.

Group Term Life insurance is a life cover, typically linked to a multiple of annual salary (for example, 1x to 5x CTC), paid to the employee's nominee on death from any cause during the policy period, including natural causes — unlike GPA, which responds only to accidental events. GTL is not statutorily mandatory for employers in India, but it is a common and relatively low-cost benefit that many businesses introduce as workforce size and competitive hiring pressure grow.

EPF (Employees' Provident Fund) registration becomes mandatory once an establishment employs 20 or more persons, and ESI (Employees' State Insurance) registration becomes mandatory once an establishment employs 10 or more persons in a notified area (thresholds and notified-area coverage can vary; some states have lower thresholds for specific establishment types). Group medical and other voluntary employee insurance are separate from these statutory schemes, but businesses should review both together — for example, employees already covered under ESI are entitled to ESI's own medical benefit, and a poorly coordinated voluntary group medical policy can create either unnecessary duplicate cost or confusion over which benefit applies.

Yes. There is no restriction preventing a company from taking keyman cover on a director who also holds shares, provided the policy genuinely reflects a key-person risk to the business rather than being structured purely as a tax-planning or personal benefit device for that individual. The commercial rationale — documented through a Board resolution — should focus on the operational and financial risk to the business of losing that person's contribution, not on their shareholding.

PNPC's core role is design, tax treatment review, and governance documentation — we are not a licensed insurance broker and do not place policies for a commission on premium. We work alongside your existing broker or insurer, or help you identify a suitably licensed one for placement, while ensuring the actual policy purchased reflects the design and recommendations from our advisory review rather than the broker's own default package.

We recommend a full review at least annually, timed a few weeks ahead of the main renewal cycle, and an ad hoc review whenever there is a material change — significant headcount growth, a new key person joining in a critical role, a salary band restructuring, or a claim event that reveals a gap. A policy renewed unchanged for several years despite salary inflation and headcount growth is one of the most common sources of quietly inadequate cover we encounter.

At minimum: the Board resolution recording the decision to take the policy and the commercial rationale for treating the specific individual as a keyman, the policy document itself naming the company as proposer and beneficiary, premium payment records, and a note on the basis used to determine the sum assured. This documentation set is what a statutory auditor or, in the event of scrutiny, an assessing officer would expect to see to support the deductibility of the premium as a business expense.

There is no statutory cap on the number of keyman policies a company may take, but each individual policy should independently reflect a genuine, documented key-person risk. A company taking keyman policies on a very large proportion of its senior team without a correspondingly clear individual business rationale for each may find the aggregate arrangement scrutinised more closely on audit or assessment than a smaller number of clearly justified policies.

Co-payment is a clause requiring the insured (or, in a group policy, the employer or the employee) to bear a specified percentage of every admissible claim amount, with the insurer paying the remainder. Some group policies apply co-payment only above a certain age band (common for parent cover) or only for treatment at hospitals outside the insurer's preferred network. A policy that looks cheaper on premium sometimes carries a co-payment clause that shifts meaningful cost back to the employee or employer at the point of an actual claim.

PNPC operates from Chennai, Bangalore, Hyderabad, and Dubai. For businesses with employees or key personnel in both India and the UAE, our Dubai office reviews UAE medical insurance requirements — which include mandatory employer-provided health insurance for employees under Dubai Health Authority and other emirate-level regulations — while our India team handles the India-side group medical and keyman design. We coordinate this as one engagement so that an employee or keyman moving between the two jurisdictions does not fall into a coverage gap between two disconnected advisors.

This depends entirely on the specific policy terms negotiated with the insurer — some group policies allow continued cover during a defined unpaid leave period (with premium borne by the employer or recovered from the employee), while others treat an unpaid-leave employee as no longer actively employed and therefore outside the cover unless specifically endorsed. This is a common gap that is rarely addressed explicitly when the policy is first purchased.

Often, yes. A structured review commonly identifies overlapping cover (for example, both the group medical policy and a separate GPA policy carrying meaningful accidental cover), sub-limits or riders that add cost without matching employee needs, or a claim-experience-based renewal negotiation opportunity that was never attempted because the policy was simply renewed each year. The net effect varies by business — some gaps found in a review require additional premium to close, while redundancy removal can offset part or all of that cost.

Life insurance claim proceeds, including keyman insurance proceeds, are not a supply of goods or services and therefore do not attract GST. The relevant tax question for a keyman claim is direct tax treatment — the proceeds are generally taxable as business income in the company's hands as discussed above — rather than any GST implication, which does not arise on the receipt of insurance claim proceeds.

PNPC charges a fixed, agreed professional advisory fee confirmed in writing before the engagement begins — scoped to the size of the workforce, the number of policy types under review, and whether the engagement is a first-time design or an annual renewal review. We do not charge a percentage of the premium placed or the keyman sum assured, which is the typical broker/agent commission model and creates a structural incentive we deliberately avoid.

An insurance broker's core competence and incentive is placing policies and earning commission on the premium — most brokers can quote and place a group medical or keyman policy competently, but few independently model sum assured against your specific financials, review the tax deductibility of premium, draft the supporting Board resolution, or coordinate the review with your statutory audit. PNPC's advisory sits specifically in that gap — the design, tax, and governance layer that determines whether the cover you eventually place actually fits your business and stands up to scrutiny.

Most group medical policies are structured without a standard pre-existing-disease waiting period, since group cover is priced on the overall risk experience of the group rather than individual medical underwriting — this is one of the key practical advantages of group cover over an individual retail health policy. However, this is a feature of the specific master policy negotiated with the insurer, not a universal statutory guarantee, and some insurers may apply conditions or a shorter waiting period depending on group size and the terms agreed at placement.

Keyman insurance is generally structured around individuals whose relationship with the business — as an employee, director, or partner — creates a clear and demonstrable financial dependency for the business. A purely external consultant or advisor without that degree of integration into the business is a more difficult case to justify as a keyman risk, and insurers themselves may be reluctant to underwrite such a policy without a clearer employment or directorship nexus.

Premium is driven by the sum insured chosen, the age profile and claim history of the group, whether parents are included, and the insurer's own pricing, and it does vary meaningfully by city because hospitalisation costs themselves vary significantly between, for example, a metro and a smaller town. Because of this variability, we deliberately avoid quoting a fixed premium figure without first reviewing the actual group's data — a number quoted without that context is not a reliable planning input.

There is no regulatory requirement to have keyman insurance in place before raising funds, but some investors — particularly at Series A and beyond — do ask about key-person risk mitigation as part of governance diligence, especially where the business is heavily dependent on one or two founders' specific expertise or relationships. Having a considered keyman insurance position, even if the conclusion is that a formal policy is not yet warranted, is generally viewed more favourably than the topic never having been considered at all.

This depends on how the group policy defines eligible members and on the nature of the engagement — a genuine contract worker or gig-economy engagement may not fit the standard 'employee' eligibility definition in a typical group medical master policy without a specific endorsement negotiated with the insurer. Businesses that rely significantly on contract or gig labour should raise this explicitly during policy design rather than assuming standard group eligibility wording covers this category.

A free look period is a window (commonly around 15 days, though it can vary by insurer and product) after receiving the policy document during which the policyholder can review the terms and cancel for a refund of premium (net of certain deductions) if the terms are not as expected. This is primarily a feature associated with individual life and health policies; group policies negotiated directly between an employer and an insurer are typically reviewed and negotiated in detail before signing, making a free look period less central to the process, though the specific product terms should always be confirmed.

We handle keyman and employee medical information under the same confidentiality standards we apply to all client financial and personal data as a Chartered Accountancy practice, sharing only what is necessary for the specific advisory task and only with the client's authorised representatives. For keyman sum assured discussions, we generally work with financial and role-based data rather than requiring detailed personal medical history, which is a matter between the individual and the insurer's underwriting process.

A TPA change mid-year is an operational matter for the insurer, but it can disrupt cashless network hospital access and claim processing continuity if not communicated properly to employees. We recommend obtaining written confirmation from the insurer of the new TPA's network hospital list and claim process, and proactively communicating this to the workforce, rather than leaving employees to discover the change only when attempting to use cashless facility at a hospital that may no longer be in the new TPA's network.