Keyman Insurance Policy

Who is the Key Person in the Keyman Insurance Policy?

In this policy, the key person is an employee whose knowledge, skills, leadership, or financial contributions are crucial to the company's success. Their absence due to death or permanent disability could result in financial loss or operational disruption.

Who Can Be a Key Person?

• Founders & Business Owners: If their vision and leadership drive the company.
• CEOs & Top Executives: Their strategic decisions impact the business's growth.
• Star Salespeople: A significant portion of revenue depends on their relationships.
• Specialised Employees: Those with unique skills that are difficult to replace.
• Financial Controllers: If they manage key investments or business finances.

Role of Keyman Insurance Policy

The key man insurance policy plays a vital role in protecting a business from financial and operational disruptions caused by the loss of a key employee. Its primary functions include:

1. Financial Protection: The policy provides a payout to the company to cover potential revenue loss and expenses incurred due to the key person's absence.
2. Business Continuity: It helps maintain smooth operations by covering recruitment, training, and transition costs for a replacement.
3. Debt Repayment: It assists in settling business loans or financial commitments tied to the key employee.
4. Investor & Stakeholder Confidence: The policy reassures investors, partners, and lenders that the business is financially secure even in unforeseen circumstances.
5. Tax Benefits: In some cases, premiums paid for key man insurance policy may be considered business expenses, providing tax advantages.

Who Can Get Insured Under Keyman Insurance?

There are basic eligibility criteria to get insured under the keyman insurance policy. The eligibility criteria are as follows:

• The keyman insurance policy must be limited to a specific period.
• The keyman being covered under the insurance plan must not own more than 51% of the company's share.
• The total number of shares held by the family of the keyman must be less than 70% of the total shares of the company.
• The company must prove that the keyman is indeed an important part of the company.

Benefits of Keyman Insurance Policy

Keyman insurance policy comes with a set of benefits. Some of them are as follows:

• As per the sum insured, the company gets coverage in the event of the sudden demise of the insured employee.
• The insurance plan contributes to the tax planning of the company.
• The premium allowed under section 37(1) of the Income Tax Act, 1961 is subject to satisfy the assessing officer as a business expense.
• Expenses incurred in recruiting or training a new employee are also covered.

Key Man Insurance Policy: Inclusions

Keyman Insurance provides financial support to businesses in case of unforeseen events affecting a key employee. It includes:

• Death Benefit – If the key person passes away, the company receives a lump sum payout to cover revenue loss, debts, and hiring costs.
• Disability Benefit – If the key person becomes disabled and unable to work, the policy provides financial support for medical treatment, rehabilitation, and business continuity.
• Critical Illness Benefit – Some policies cover critical illnesses, offering a lump sum to help with medical expenses and business disruptions.
• Policy Ownership – The business owns the policy, pays the premiums, and receives the payout, ensuring financial stability.

Keyman Insurance Policy: Exclusions

The policy does not provide coverage for the following:

• If the insured raises a claim that turns out to be fraud or the insurer detects any kind of misinterpretation, then no coverage will be provided.
• The insurer will not provide coverage in case the keyman commits suicide.
• The insurer will not provide coverage in case of any intentional dishonesty or negligence of the keyman.

How To Raise A Claim Under Keyman Insurance Policy?

Here are the steps that you can follow to raise a claim under the Keyman insurance policy:

1. Claim Intimation – Inform your relationship manager about the key person's demise or covered disability as soon as possible.
2. Submit Claim Documents – Fill out the claim form and provide necessary documents, such as the policy details, medical reports (if applicable), or death certificate in case of death.
3. Claim Assessment – The insurer reviews the submitted documents and may request additional information if needed.
4. Verification Process – If required, the insurance company may appoint an investigator to verify the claim.
5. Claim Settlement – Once verified, the insurer disburses the claim amount to the business as per policy terms.

Keyman Insurance -FAQs