Keyman Insurance Policy

Keyman Insurance Policy:

We all are well versed with life insurance, have we ever listen life insurance for business! Life Insurance policy helps out family of bread-earner, in case of demise of him.
Life Insurance helps out in similar way to business in case of demise of the Key Employee of the business in form of Keyman Insurance.

Keyman Insurance Policy is Life Insurance policy where the Proposer and Payer(premium) both should be the Employer. And the Life to be Insured should be Key Employee (Keyman) of the business. There is no definition for Key Employee, it can be any employee or can be some employees. As in business, there one or some employees work as significantly for the business and have strength to lead the business to highest.

Keyman Insurance helps out the employer monetary, if there untimely demise of key-employee, as the death of key-employee directly hit the revenue/profit of the company, and the insurance’s claim amount can compensate the loss to business.

Keyman includes key-woman also, and we can cover the life of key-woman, there can we many key-man and key-woman in company whose unique skill-set, adequate responsibilities, contribution for profit of the business. It’s just a form of life insurance to provide risk-cover for a need in business.

In Keyman Insurance, we can cover business partners also in partnership firms.

Eligibility for Keyman Insurance:

  1. Business should be profitable.
  2. Key-man should be permanent employee with significant role in profit of the business.

Maximum Cover provided:

  1. 10 times of the annual salary of the keyman.
  2. 5 times of average net profit of the business for last three years.
  3. 3 times of average gross profit of the business for last three years.

Benefits of Keyman Insurance:

  1. Every single rupee paid as premium will be treated as Business Expenses and firm would save upto 30% + surcharges.
  2. Protection of loss due to untimely death of keyman to business.
  3. Employer can give full/partial amount to keyman’s family in case of demise, every single rupee will be treated as Business Expenses and save tax.
  4. Employer image will be good in employee’s eye and they might be loyal for business and help to increase the profit.

Policies allowed under Keyman Insurance:

  1. Endowment Insurance Policies
  2. Term Insurance Policies.

other policies not allowed under Keyman Insurance, per the IRDA. There is no Income Tax benefit under Keyman Insurance.

Disadvantage: Amount on claim, maturity or on surrender would not be Tax-Free under section 10(10D),

if employer pay that money as Gratuity to employee or Death compensation to employees dependents, then the paid amount will be treated as Business Expenses.

Amit Saxena

Financial & Insurance Consultant
MaxLife Insurance Co Ltd & MaxBupa Health Insurance

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: