keyman insurance definition: Keyman Protection


Ashok Private Limited paid ex gratia payment of Rs 2 crore to family of Manish and kept Rs 3 Crore as reserves for loss compensation. An insurance is a legal agreement between an insurer and an insured , in which an insured receives financial protection from an insurer for the losses he may suffer under specific circumstances. Insurance companies can even seek legal help when it must disburse a claim under corporate insurance.


Keyman life insurance can be offered to such employees considering the value and their need for the organization. The most important thing is that the keyman insurance can even be taken by the partners of a family business where the sudden demise of any keyman can result in loss to the organization. Keyman can be an employee of an organization or a partnership firm or any proprietorship company who plays an important role in the functioning of the organization. There can be more than one keyman in an organization without whom the business would be affected for a certain period of time. Have you ever thought of the consequences that could arise due to the sudden demise of the keyman of your organization? Well, there could be direct and indirect losses to your organization in the form of monetary loss, business loss etc.

Eligibility Requirements of a Key Person Insurance policy

At we bring together the original resources, expert consultants, tools and passive lead generation opportunities to grow your business in digital space. With the help of leading experts from industry, we’re committed to building a resource for every answer you need pertaining to your business’s financial, compliance, legal or strategic aspect. This is the amount that the Insurer agrees to pay the Insured/Nominees on the occurrence of a contingency (e.g., death) or on maturity.

Taxation when a life insurance policy behaves like an asset Mint – Mint

Taxation when a life insurance policy behaves like an asset Mint.

Posted: Wed, 04 Feb 2015 08:00:00 GMT [source]

The organization can claim income tax benefits by showing the premium paid as a business expense. He further held that the policy has been assigned in favour of the partners and this policy is in contravention of IRDA guidelines. Moreover, the beneficiary is not a employee or director but is a partner. It has also not been explained as to how the maturity value of the policy has been treated by the assessee has assigned in their books and whether maturity sums have been offered for taxation or not.

With our life insurance experts to have a better understanding of the policy. 5 times the average net profit of the organization for the last three years. Three times the average gross profit of the organization for the last three years. Five times the average net profit of an organization for the last three years. Three times the average gross profit of the organization for the past three years. There should be some relative proof submitted by the company to the insurance company to prove that the keyman has to play an important role in the organization.

How does an Insurance Policy Work?

Business owners must carefully consider all options when selecting appropriate key man insurance since different policies offer varying levels of protection, each with its own advantages and disadvantages. Further, lack of clarity about the criteria for qualifying as a keyman insurance policy has also led to litigation. To calculate the premium of a key man insurance plan, employers can use a keyman insurance premium calculator online. Calculating the amount will help employers to choose the right policy and take the right decision at the time of investing money under such plans. To calculate premium amounts with high accuracy, the employer is required to enter proper details, which is used by the calculator to calculate the value. Under Section 10, the life insurance benefits you or the nominee receives from the insurance company are tax-exempted.

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Key Contract Terms For Musicians And Managers – Music and the ….

Posted: Mon, 19 Dec 2022 08:00:00 GMT [source]

It is the amount payable by the Insurer to the Insured/Beneficiary in the event of a claim arising. These are the terms/words that are new to finance but have significance. If you have previously used our Financial Dictionary, then the words checked and their meaning would be displayed under this category. We have developed this Financial Dictionary that could be used by anyone for free on our website. We have provided the meanings of almost all the financial terms along with the context in which they can be used. If you have lingering doubts on any financial term, then all you must do is log on to our website and check out the Financial Dictionary.

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On the other hand, a D&O policy insures the company against legal liabilities imposed while performing his duties. The premium paid for buying a Keyman insurance policy is considered to be a business expense. This expense is allowed to be deducted from the taxable profits of the company under Section 37 of the Income Tax Act. This deduction, therefore, lowers the taxable profits of the company and reduces its tax liability. The other feature of keyman insurance is that the nomination of keyman insurance policy can be done only in the name of the organization which is taking the keyman insurance policy. Even Though the keyman insurance is a type of term insurance policy, the nomination in keyman insurance can only be done in the name of the organization thus making the organization beneficial.


Keymen insurance policy is actually a kind of business insurance which has no legal definition. In this policy the company offers compensation over the death of an important person of the business. All things considered, key man insurance provides many benefits; however, its effectiveness depends on finding the right coverage tailored towards the specific needs of each organization. Businesses should assess what risks they face and determine whether purchasing a policy is necessary before making any decisions. This is the date upon which, the face amount of a life insurance policy is paid to the policy holder – that is, if the policy hasn’t been previously invoked to cover contingencies like death etc. Bonus is the amount added to the basic sum assured under a participating life insurance policy.

Let me know where you found the erro and also let me know how much you know about the subject.Be careful before giving adverse comments. Globalization has resulted in Indian companies, particularly from the knowledge-based sectors, increasingly accessing the global markets for capital as well as acquiring and setting up companies in other countries. By submitting this form you authorize PolicyBachat or it’s affiliates to contact you and override NDNC registry. Documents Required for Insurance PoliciesWhat are the Documents required for Insurance Policy in India? Know about documents that have to be submitted at the time of Buy, Renewal, and Claim Process. So could you please provide us with any case Law of the ITAT, High Court, Supreme Court supporting the view that the Maturity Proceeds of the Keyman Insurance Policy are exempt.

  • Life insurance is normally offered after a medical examination of the life to be assured.
  • And is sent by the Insurer or one of its agencies to the Insured.
  • Even there is an option of relocating the policy to the new employer of the Keyman if both the company agreed for the condition.
  • Customers are advised to take independent professional advice before participating.

What is the latest status of sec 10 , under employer employee scheme, if the money comes in the form of claim. Will it be taxable in the hands of legal heirs even if it is passed on to them by the employer as ex gratia. Wanted to know about the latest tax implications of this money to the legal heirs. Everyone looks at getting knowledge about different kinds of insurance plans.

Financial continuity is created on day 1 with a relatively small investment ensuring liquidity at the time of crisis. That is where Keyman Insurance comes in to protect your business and your family. Why Looking at Insurance as Just a Tax Saving Tool Could Be Wrong?

Term Life Insurance

The company would assess the insurance requirement of the business and offer coverage under Keyman insurance. Please guide me about the benefit of employer employee insurance policy of taxation benefit for public ltd company and IRDA Norms also. All claims – maturity, surrender or death benefit received by the company are taxable. The major advantage of keyman life insurance is the lump sum amount that is payable in case of sudden demise of the keyman.


With the sweeping changes in the profile and the responsibilities of the directors, it is becoming increasingly necessary for the persons intending to become directors to seek protection in some form or the other. Insurable interest is the interest of the insured customer in the insured property as per the legal definition. There should be proof of insurable interest at the time of taking the insurance policy. In simple words the insured customer should suffer financially or mentally if the insured property is damaged. For more details on risk factors, terms and conditions, exclusions, please read sales brochure of insurer and policy terms and conditions carefully before concluding a sale. IRDAI is not involved in activities like selling insurance policies, announcing bonus or investment of premiums.

  • No party shall be held liable for financial or other any other form of loss incurred by the user or any affiliated party on the basis of information provided herein.
  • A specific time that must pass following the onset of a covered disability before any benefits will be paid under a disability income policy.
  • Here the keyman must have some special skill to contribute his or her considerable responsibility to the profit of that organization.
  • This usually is the case with a money-back policy where, the Insured enjoys the benefits of surviving the contingency (e.g. death).
  • The death benefit received by the company in case of death of the insured employee is fully taxable.

All or part of the commission earned by the Insurer’s agencies being passed on to the prospect as an inducement to buy or renew a policy. This is the notice that informs the Insured about the premium due. And is sent by the Insurer or one of its agencies to the Insured.

ICICI Bank had lodged a complaint under the D&O policy for INR 250 million as an outcome of an ongoing battle initiated by Commmerzbank.The case is related to funding of Arvind Mills by ICICI bank. Commerzbank had objections to this funding, the claim was filed for recovery of expenses. SEBI fined RIL in the case where it violated the SEBI takeover’s regulations with respect to Ril’s holding in cement and engineering major L&T. D&O does not pay fines and penalties but investigation which is substantial can be covered under the D&O policy. Improve the company’s ability to recruit directors and officers who are qualified to be.

A keyman insurance is a plan that is purchased by the employer of a company or business for their employees. In this case, the proposer and the premium payer of the policy is the employer and the insured person is the employee. So, a key man policy is ideally meant for an organization who want to secure the lives of their employees against the risk of unexpected incidents, accidents or death. Under this plan, the employer proposes the policy as well as pays the premium to secure their employees from risks. Hence, the life insured under these plans are the employees, while the benefit of claims goes to the employer.

We’ve tried blend all the possible keyman insurance definitions, but if you have any other query or doubt you can always reach out to our financial advisors. If you are a Financial Advisor, then it is extremely important to stay updated on the latest financial terms. We at update all the new terms used in personal finance in the Financial Dictionary. You can refer and update yourself, to serve clients effectively. This is a double bonanza of increasing your efficiency and fetching clients more money.

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