Page 38 - Life Insurance underwriting Ebook IC 22

The amount of cover on each partner will depend on the amount of the purchase money
required to be paid to the heirs in the event of death. This can be determined by the
contribution to the share capital, share of profit up to withdrawal and the goodwill of the
individual partner.

To minimize the anti-selection, it is advisable to consider partnership insurance on the
lives of all the partners simultaneously.

4.2 Insurance under employer-employee scheme

Features

This is a type of business insurance. The salient features of this scheme are given
below:
 Progressive employers are keen to retain the services of their experienced
executives and employees.
 The employer as a "proposer" takes life insurance policy on the life of a
designated employee, where the benefits are payable to the employee.
 No maturity benefit accrues to the employer under the policy.

Approaches to implementing the scheme

There are two approaches to implementing this scheme.
Approach 1: Employer is the policyholder of the policy

i. Employer as the policyholder needs to assign the benefits of the policy to the
respective employee, immediately on conversion of the proposal into a policy.
ii. The premium paid by the employer is held as deductible business expenses and
treated as perks in the hands of the employee.

Approach 2: Employee is the life to be insured and the policyholder of the policy

Employee is the proposer himself and retains control over the policy as the owner of the
policy.
The premiums are paid by the employers and are treated as deductible business
expenses. However, in the hands of the employee, the premium would be treated as a
perquisite and hence taxed to the employee.

Since this policy is taken for the benefit of an individual employee, the cover is
determined on income multiple basis for that individual employee.

4.3 Insurance under Hindu Undivided Family (HUF)

Meaning of HUF

Definition

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