KEYMAN INSURANCE
Who is a KEYMAN ?
• A man instrumental to either gain or loss of the company can be termed as keyman. Exit of
such person due to any premature demise would in many cases result in immediate
financial loss to the company.
• The keyman for the company can be:
MD/CEO
Directors
CFO/CDO
Project Managers
What is KEYMAN Insurance?
• Key man Insurance Policy is a cover effected by a company to compensate the
financial loss suffered following the premature demise of a key member of the
organization.
What does it cover?
• The loss of sales attracted by his/her ability and personality.
• The loss due to his/her day to day specialized skills.
• The cost of recruiting and training a suitable replacement.
• The cost of cancellation and delay of any project which was dependent on he/she.
• The loss of opportunities for future expansions.
• The loss of good management and relation.
Basic eligibility requirements for KEYMAN Insurance
• The ‘Key-man’ should hold less than 51% of the company’s share.
• The total number of shares of the company held by the Keyman and his family together
should be less than 70% of the company’s share.
• Some proof of the critical role that the proposed life (the Keyman) plays in the business of
the company, is required.
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The maximum sum assured for KEYMAN Insurance
• 10 times the Keyman’s annual compensation package.
• 3 times the average gross profit of the company for the past three years.
• 5 times the average net profit for the past three years.
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Taxation aspects of Keyman Insurance
• In the hands of the company, the premium paid by the company qualify as eligible business
expense under Sec 37(1) of the Income Tax Act.
• The maturity /Death claim amount received by the company are not tax free under section
10(10D) of the Income tax Act as it will be added to the business income in the year of
receipt.
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Thank you!!
