Along with a great team, there are always catalysts that a company relies on to move forward in the right direction. These people who are critical to the business, and are responsible for the growth of the organization are called Keyman/Key person.
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.
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.
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.
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.
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.
The company gets payment equivalent to the sum insured in case of the death of the key person.
Helps with the cost of hiring new talent or training an existing employee as a replacement for the key person.
Make up for any loss of profit/debt due to the death of the key person.
Keyman insurance policy can be used as a guarantee for business loans and can be put towards shareholdings or partnership interests.