Keyman insurance can be defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the employee and the benefit, in case of a claim, goes to the employer. The `keyman’ here would be any person employed by a company having a special skill set or substantial responsibilities and who contributes significantly to the profits of that organization.
Anybody with specialized skills, whose loss can cause a financial strain to the company are eligible for Keyman Insurance. For example, they could be:
1. Directors of a Company
2. Key Sales People
3. Key Project Managers
4. People with Specific Skills
1. In case of death of a keyman the company gets money to cope up with the loss
2. any company buying keyman insurance for its employee can claim a deduction for the premium paid for the policy as a business expense under Section 37(1) of the Income Tax Act.
3. No advance intimation/approval is necessary from the Income Tax authorities to claim deduction of insurance premium payment.
4. It also helps the company in its tax planning.
5. Premiums paid by the company on the life of a keyman would not be treated as perquisites in the hands of such a keyman when the company’s request is accepted by the assessing authority.
Republished with Amendments