keyman insurance policy | what to buy Key insurance policy | benefit | Features | what Keyman policy covers | documents
Why to take unnecessary business risks when you as as business owner can secure your business. Insuring has become now so easy with the right type of insurance policy which is called keyman insurance
What is a keyman insurance policy?
Along with a big and effective team, there is always a catalysts that a company relies on to go forward in the right direction and succeed. These are people who are critical to the business or companies, they are fully responsible for the growth of the organization are called Keyman /Key person.
A Keyman insurance policy is an insurance where the employer pays the premium for the life insured of the key person to compensate for any financial losses occured due to the unexpected death of the key person.
Why to buy a keyman insurance policy?
Grow through the pain of lose
It is hard to lose someone who acts like a backbone. But, try getting back on your feet with all the possible help you could get.
Talent retention
By insuring the key person, you will make them see the value they have add to the company. This will boost the morale of the key person and help the person in retaining the best talent.
Attract investors/ company owner
Keyman insurance policy is a great source of financial revival. It enables all the banks and investors to believe that there is no room for major financial losses.
Tax benefit
By buying keyman insurance policy, you can claim tax benefits form the premium as a business expense under section 37(1) of the income tax act.
Features of Keyman insurance policy
Bereavement benefit
The company will get payment equivalent to the sum insured in the policy in case of the death of the key person.
Succession planning
This will Help with the cost of hiring new talented key person or get training an existing employee who will be the replacement for the key person.
Manage loss/debt
This policy will make up any loss of profit/debt due to the death of the key person.
Use as assurance
Keyman insurance can be used as the guarantee for business loans and can be put towards shareholdings or partnership interests.
What does keyman insurance policy cover?
A keyman insurance policy usually covers the below 3 things and considers the least of all as the sum assured cover.
- This insurance generally covers 10X salary of the insured person
- This insurance generally covers 3X average gross profit of the company which depends on the key person
- This insurance generally covers 5X average net profit of the company which depends on the key person
Documents required for Keyman insurance policy
- Application form signed by the insured person and the authorized person on behalf of the company
- Age proof of insured person
- Board resolution allowing for the purchase of a Keyman insurance and appointment of authorized signatory
- ITRs/ Audited book of accounts including P&L accounts/ Balance sheets of the company with all schedules for the last 3 years
- KYC – POA & POI of Company and Life assured
- Personal ITRs of Keyman for the last 3 years with computation of Income
- Memorandum of Association & Articles of Association / Partnership deed of the Company
- Keyman endorsement & Keyman Questionnaire
- Detailed resume of Keyman
- Beneficial Owner Declaration, along with KYC of all stakeholders
Benefits Keyman insurance?
- The business entity is the proposer and the key person is the life to be insured.
- Premiums are to be paid by the business/company.
- In the event of the key person diseased, the business/ company will get the sum assured under death benefit.
FAQ
What is a keyman insurance policy?
Keyman insurance is a type of insurance policy where the employer pays the premium to cover any financial losses incurred due to the sudden death of the employee who is very important for the business.
What are the Benefits of keyman insurance?
Keyman insurance is highly beneficial for businesses that are dependent on the key person who aids the growth and profit of the company. Keyman insurance covers company from the losses due to the unfortunate death of the key person and risking the business.
What is the Keyman insurance cost?
The premium paid for the Keyman insurance is not fixed and it depends on factors such as age, gender, health, compensation of the insured, and the type of coverage the business needs.
Does the keyman insurance policy come under the income tax act?
Yes, the keyman insurance policy comes under the Income Tax act. The premium paid for the keyman insurance can be claimed as a business expense under Income Tax Act. Also, the proceedings for the Keyman insurance are tax-free.