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KEYMAN INSURANCE

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What is Key Man or Key Employee Insurance?

Key worker or key man is a term utilized explicitly for a significant representative or official who is central to the activity of the business and his passing, handicap or nonattendance could end up being terrible for the organization or association.
Portrayal: Some organizations have over the top reliance on specific administrators who are critical for the smooth working of the business.
The nonattendance of such key representatives can cause enormous misfortunes.
Hence, organizations decide on a key man protection strategy that gives defend against misfortunes caused because of unexpected downfall or handicap of the 'key man'.
This sort of arrangement is, on the other hand, alluded to as key individual inclusion, key worker inclusion, and so on.
The organization of the business is the recipient in case of misfortune and the premiums are paid by equivalent to the cost of doing business.
They accompany a first beyond words that empower the firm to safeguard various representatives in a similar approach and consequently is progressively prudent contrasted with a standard extra security arrangement

Why Key Man Insurance?

Key-man insurance could be a great financial recourse for companies once they lose a key functionary.
It's many benefits like reduced taxable income, availability of needed funds and even boosting the morale of the key-man himself.
A 'key-man insurance' is basically a canopy that ensures a payout which helps a business live through the loss of a valuable asset like its owner, partner, chief director, CEO, or any employee the corporate considers to be an integral a part of its functioning.
Key-man insurance are often defined as an policy where the proposer could be a company, the premium is paid by the corporate, the claim also goes to the corporate, but the insured is an employee.
This representative releases noteworthy obligations, contributes tremendously to the organization's benefits and is along these lines urgent to the working of the business
The aim of key man insurance is to enable the corporate to recoup the loss from the event of the key-man's untimely death.

Tax Benefits

The Key-man insurance policy death benefits are not tax-free under section 10 (10D) of the Income Tax Act. II. ... The premium paid by the company is not taken as a perquisite in the hands of the Key-man under section 17(2) of the Income Tax as the policy is for the benefit of the company and not the Key-man.

Income Tax Exemption on payment of Life Insurance Premium (Sec. 80C)

Life Insurance premium paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof under an insurance policy, (other than a contract for a deferred annuity,) issued on or before the 31st day of March 2012 shall be eligible for deduction only to the extent of 20% of the actual capital sum assured or actual premium paid whichever is less.
Life Insurance premium paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof, under an insurance policy, (other than a contract for a deferred annuity,) issued on or after the 1st day of April 2012 shall be eligible for deduction only to the extent of 10% of the actual capital sum assured or actual premium paid whichever is less.. Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person,
who is—
I. a person with disability or a person with severe disability as referred to in section 80U, or
II. suffering from disease or ailment as specified in the rules made under section 80DDB, deduction under this section is allowed only to the extent of 15% of the actual capital sum assured or actual premium paid whichever is less.
Contribution to deferred annuity plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

Income Tax Deduction under section 80D

Deduction allowable upto Rs.25,000/- if an amount is paid to keep in force an insurance on health of assessee or his family (i.e. Spouse & dependent children) or any contribution made to the central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf or on account of Preventive health check –up of the assessee or his family .
Additional deduction upto Rs.25,000/- if an amount is paid to keep in force an insurance on health of parents or on account of Preventive health check –up of the parent of the assessee, whether dependent or not .
In case of HUF, deduction allowable upto Rs.25,000/- if an amount is paid to keep in force an insurance on health of any member of that HUF.
If the sum specified in (a) or (b) or (c) is paid to effect or keep in force an insurance on the health of any person specified therein who is a senior citizen, then the deduction available will be up to Rs.30,000/-. Here senior citizen means the person who is of sixty year or more during the previous year.
In Case the amounts are paid in (a) or (b) or (c) on account of preventive health check up , the deduction for such amounts shall be allowed to the extent it does not exceed in aggregate Rs. 5,000 /-.
For the purpose of deduction, the payment shall be made by
Any mode, including cash, in respect of any sum paid on account of preventive health check up .
Any mode other than cash in all other cases.
The insurance as mentioned above shall be in accordance with the scheme framed by
The General Insurance Corporation of India as approved by the Central Government in this behalf or;
Any other insurer and approved by the Insurance Regulatory and Development Authority.

Income Tax Exemption on Maturity / Death Claims proceeds under Section 10 (10 D)

As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life Insurance Policy, including the sum allocated by way of bonus on such policy is exempt from tax where the sum is received as a death benefit.
To get exemption under above section for sum received other than death benefit following conditions to be satisfied:
I . Policy shall not be issued under Section 80DD(3), or
II . Policy shall not be issued as a Key man Insurance Policy, or
III . Policy which has been issued on or after April 1, 2003 and the premium paid in any of the years during the term of the policy not exceeding 20% of the Actual Capital Sum Assured.
IV . Policy which has been issued on or after April 1, 2012 and the premium paid in any of the years during the term of the policy not exceeding 10% of the Actual Capital Sum Assured.
Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—
a person with disability or a person with severe disability as referred to in section 80U, or
suffering from disease or ailment as specified in the rules made under section 80DDB, exemption under this section shall be available only if the premium payable in any of the years is not more than 15% of the actual Capital Sum assured.

CLAIM PROCESS FOR LIFE INSURANCE POLICY

Step by step instructions to make a Claim – Life Insurance

I . At the point when an individual with a disaster protection strategy – called a real existence guaranteed – passes on, a case insinuation ought to be sent to the insurance agent as ahead of schedule as could reasonably be expected.
The chosen one or candidate under the arrangement can do this.
So can any close family member or the operator who handles the strategy.
The case suggestion ought to contain data like the date, spot and reason for death.
The protection specialist has the obligation to help the existence guarantee’s family/trustee to manage the insurance agent to satisfy the conventions for a case.
II . The insurance agent will react to this insinuation and will request the accompanying archives:
Topped off case structure (gave by the insurance agent)
Endorsement of death
Arrangement report
Deeds of assignments/re-assignments assuming any
Legitimate proof of title, if the strategy isn't doled out or designated
III. Type of release executed and saw
Different archives, for example, restorative chaperon's testament, emergency clinic authentication, boss' endorsement, police examination report, after death report and so on could be called for, as relevant.

Maturity Claim Process of Life Insurance Policy

Where an extra security strategy is developing, the insurance agent will normally send implication to the policyholder alongside a release voucher in any event a few months ahead of time of the date of development giving subtleties like the development sum payable.
The policyholder needs to sign the release voucher – which resembles a receipt – have his mark saw and send it back to the insurance agent alongside the first approach attach to empower it to make the instalment.
On the off chance that the approach has been allotted for some other individual or substance – like a lodging credit organization – the case sum will be paid distinctly to the trustee who will give the release.