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Insurance Children Youngsters Women Couples Senior Citizens Professionals Employers & Employees Group Schemes Keyman & Partnership Jeevan Shree Keyman Retirement Plans     Insurance >> Keyman Partnership >> Keyman Companies can insure their Key Man for protecting their loss in the event of death of the Key Man before his retirement.  The very fact that a Company is successful because of its top Executives who may be technocrats, financial experts, good administrators, people with innovation etc, the contribution made by them to the companies growth will come to an end on sudden death and will cause a dent in profitability.  More or less it is like fire taking place in a portion of the plant.  Like plant is insured Key Man has to be insured.  The manner we go abut will determine the possible loss that can occur so that company can insure that loss.  since a Key Man is a salaried executive the loss can be measured so many times of the salary, may be 50 to 100 times the monthly salary.  The Company owns the policy though Key Man is the life insured and the Company gets the proceeds on death and life insured's family does not receive anything.  In the case of Public limited Companies, loss of a Key Man can be easily absorbed because replacements are generally handy and resources very big.  But in the case of Private Limited Company or Closely held Company the situation is very alarming for the owners if there is no Key Man policy.  In the pursuit of their progress : targets and goals the Owner Director puts in his very best not only in terms of his physical and technical involvement but he places all his finances in the Company.   In any project there are institutional loans and at any given time, there are standing charges and liabilities of wages, interest, suppliers etc.  Should anything happen to Owner Director all the aforesaid liabilities will be first charge on the Company and only if something left will be heirs share.  The heirs share is the last charge on the company. A Key Man policy is a solution so that in the unfortunate death of the Key Man the Company receives a reasonable sum to satisfy the liabilities of the creditors for a smooth transition and heirs can take over the company.  Life of the company is thus insured. Q. 1 Who is KEYMAN? Ans KEYMAN is a person whose services contribute substantially to the success of the Business   Q. 2 What is KEYMAN Insurance.. and why is it necessary for a. firm? Ans KEYMAN Insurance is Life Insurance on the life of Key person (or persons) of a company and is purchased by the Company to indemnify itself against loss/reduction of future earnings that may result from death/resignation of the KEYMAN.   Q. 3 Who is the Proposer and Beneficiary under the Policy? Ans Only the company can be the Proposer. and Beneficiary under the Policy.   Q. 4 What is the maximum insurance available to a KEYMAN? Ans There is no hard and fast rule but a KEYMAN can be offered insurance of Sum Assured equal to : 10 times average of : Last 3 years salary + perks OR 2 limes average of : Last 3 years Gross Profit OR 5 times average of : Last 3 years Net Profit   Q.5 Under which plan of Insurance is cover granted for the KEYMAN? Ans Only Jeevan Shree (T.No. 112) is allowed under KEYMAN Insurance   Q. 6 What is the Tax Treatment of the following transactions: a) Premium paid by the company (i) for Company (ii) for KEYMAN b) Death or Maturity Claim or Surrender Value received by the company. Ans a) (i) Premium paid by the firm will be treated as expenses under Sec 37 (1) of I.T. Act 1961. (ii) As the KEYMAN does not have any interest in the policy, the premiums will not be included in his income. b) Proceeds of Maturity/Death Claims./Surrender Value are assessed together with other revenue in the year f receipt as per the gross profits of the firm. Interest paid on the Po1icy loan availed is treated as expenses of the firm.   Q. 7 Can the KEYMAN of the Company be substituted by another KEYMAN? Ans Yes through the purchase f a new policy on the life of the new keyman   Q. 8 Can the KEYMAN Policy be transferred to another Company? Ans Yes, the policy can be transferred to the new employer on mutually agreed terms in which case the new employer starts paying the premium. This transfer, however will be subject to the Insurers financial underwriting requirements.   Q. 9 Can the KEYMAN Insurance Po1icy be assigned to the employee? Ans Yes, on payment of the price equal to Surrender Value at the time of Transfer   Q.10 After assignment what will be the treatment of future premium paid by the Life Assured to keep the KEYMAN Policy in force. Ans Th. premium. paid by the Assignee will be eligible for Tax Rebate u/s 88.   Q.11 What will be the Tax Treatment in the case of Maturity / Death / Surrender Value after assignment? Ans These proceeds will be treated as receipts from Maturity of Ordinary Individual Life Insurance Po1icies.   Q.12 What are the documents to be submitted at the time of proposal? Ans KEYMAN Questionnaire (with Annexure A, B & C)  Resolution by the Board of Directors authorising purchase of KEYMAN Insurance. Copy of Memorandum & Articles of the Association of the company. Copies of Audited and Annual Accounts for proceeding 3 years together with Balance Sheet and Profit /Loss Account of the Company. Proposal form No. F. No. 340 Certificate showing share holding of KEYMAN in the Company   Top           Home   About Us   Facts Findings   Clients  Services   Life Insurance   General Insurance   Savings   Housing Loans   Health Care   NRI's   Latest Introduction   FAQs Feedback   Contact Us   Site Map   © Udhanawala Insurance & Investment Consultants, 2009