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Keyman Insurance Policy
A Keyman insurance is a type of insurance where the employer pays the premium for the life insured of the key person to compensate for any financial losses due to the unexpected death of the key person.
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Why Buy a Keyman Insurance Policy?
Grow through the pain
Yes, it’s hard to lose someone who has been a backbone. But, try getting back on your feet with all the possible help you could get.
Go big on talent retention
By insuring the key person, you make them see the value they add. This boosts the morale of the person and helps in retaining the best talent.
Attract investors
Keyman insurance policy is a great source of financial recoup. It enables banks and investors to believe that there is no room for major financial loss.
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Cut back on taxes
On buying keyman insurance, you can claim tax benefits for the premium as a business expense under section 37(1) of the income tax act.
Bonus tips for specific letters:
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Bereavement benefit
The company gets payment equivalent to the sum insured in case of the death of the key person.
Succession planning
Helps with the cost of hiring new talent or training an existing employee as a replacement for the key person.
Manage loss/debt
Make up for any loss of profit/debt due to the death of the key person.
Use as assurance
Can be used as collateral for business loans and transferred to shareholdings or partnership interests.
Bonus tips for specific letters:
What does your keyman insurance cover?
A keyman insurance policy protects your business against financial losses if a key employee leaves or becomes unable to work. Coverage is determined by the least of these three factors:
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10X salary of the insured- 3X average gross profit
- 5X average net profit
Documents required for
Keyman Insurance Policy
- Application form signed by the insured and the authorized person on behalf of the company
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Age proof of insured
- 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
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KYC - POA & POI of Company and Life assured
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Personal ITRs of Keyman for the last 3 years with computation of Income
- Memorandum of Association & Articles of Association / Partnership deed of the Company
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Keyman endorsement & Keyman Questionnaire
- Detailed resume of Keyman
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Beneficial Owner Declaration, along with KYC of all stakeholders
Frequently asked questions about Keyman Insurance Policy in India
What is keyman insurance?
Keyman insurance is a life insurance policy taken by a company on a critical employee, where the company is the policyholder and beneficiary.
Benefits of keyman insurance?
Keyman insurance is highly beneficial for businesses that are dependent on the key person who aids in the growth and profit of the company. Keyman insurance covers you from the losses due to the unfortunate death of the key person and risking the business.
How much does a Keyman insurance cost?
The premium paid for the Keyman insurance is generally not fixed and depends on factors such as age, gender, health, compensation of the insured, and the type of coverage your 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.
Which losses are covered under keyman insurance?
Keyman insurance covers financial losses due to the reduced profit, debt, etc., caused by the unexpected death of the key person of the company.