Keyman Insurance

We devote a significant amount of time and effort as a company in not only developing talent but also making investment in each of our workers. In such a situation, it makes sense to insure the position of an employee who is critical to the smooth operation of the business.

This is where keyman insurance comes in handy. Keyman insurance is described as an insurance policy in which the employer is both the proposer and the premium payer, the life to be insured is that of the employee, and the benefit is paid to the employer in the event of a claim. Any employee of a corporation with major duties who contributes considerably to the company's profitability would be considered a "keyman."

Employee mortality can result in two sorts of losses for the company:

• Loss resulting from the company's profit drop
• The company's costs of replacing the key employee

If the company has keyman insurance, the sum assured is paid to the company upon the death of the employee. This amount is usually pretty considerable, and it is enough to not only go through any corporate slump, but also to hire a new senior executive. If the insured person lives to the duration of the insurance term, the company receives no money.

The Benefits of Keyman Insurance

• In case of death of the employee, the company is compensated for the loss and is able to continue operations without interruption.
• The strategy aids in tax planning for the company* - Premium is deductible as a business expense under section 37(1) of the Income Tax Act of 1961, provided the assessing officer is satisfied.
• When a company is covered by keyman insurance, options including recruiting and training skilled employee replacements, managing debt and liquidation, and even successfully selling the company are all possible.