If you love your company, you will treat it like your family. When it comes to protecting your family, exactly like life insurance, you can take keyman insurance to protect your company. Keyman insurance, as the name suggests, points towards insuring or protecting the life/lives of those who make the company, who are the pillars of strength. It could be one of the key employee(s), one of the owners or any important person whose presence and absence makes a huge impact on the growth and future of the company. Let’s go into details and understand how the keyman insurance supports the company and its future in this article.
Aim of keyman insurance
The company insures the life of the identified key person amongst others and pays the premium for the chosen policy. That means the company is the proposer and will be the receiver of the claim at the event of an untimely death or diagnosis of a serious illness or an accident in the key person’s life. The main aim of taking this policy is to safeguard the company and those dependent on it. Life is unpredictable, and when you can protect your business and employees against an unforeseen incident, why would you not opt for it? This insurance can support the losses incurred due to the inability of the key person to work during illness. This insurance also is in the interest of the shareholders or partners of the company.
Criteria and other details of insurance
A keyman should be a shareholder of less than 51% of the company shares. Also, the total number of shares held by the keyman and his/her family should be less than 70%. Usually, the sum assured is equal to the money invested, such as to help the company run the business well after the untimely death of the keyman. Maximum sum assured for this insurance is 10 times the salary of the life insured or 3 times the average gross profit of past 3 years or 5 times the last 3 years’ net profit or 5 times the average net profit of the company in the last 3 years. The company can enjoy the tax benefit of insurance. However, because the premium is paid by the company, this insurance is considered business expenditure, and hence, tax is applicable to the claim proceedings.
Keyman insurance is a saviour for companies that have fewer people. Find out more about how you can save and protect your company with this insurance from Kapil Mathur, the best key man in the insurance business.