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Keyman Insurance Policy - Know Eligibility, Benefits, Features & Documents
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A detailed guide on Keyman Insurance Policy

Insurance policies are ideal for those who want to protect their families from financial crunches in case of a death. They focus more on satisfying the needs of individuals, families, and groups with several features. At the same time, one should know more about them from various sources while investing money. For example, an organization or business cannot run its operations without employees. Therefore, it should consider protecting them from unforeseen events of life. Nowadays, insurers offer exclusive plans for businesses, and they can choose the right one among them for employees after doing complete research.

Companies appoint highly experienced professionals for planning various types of work with high efficiency. On the other hand, they have to spend more money hiring new employees, resulting in increased expenses. As a result, insurance companies aim at satisfying the needs of organizations that want to retain qualified staff for their business. Keyman insurance specializes in offering coverage for employees to safeguard their employees from the untimely death or unforeseen events. The insurance provides several advantages to employees, thereby significantly showing ways to get maximum protection from the financial burden. 

What is Keyman Insurance Policy?

Employers should understand what is a keyman insurance plan from different sources before investing money. It is mainly meant for companies to take care of their employee’s death risk from unexpected incidents. In this policy, the employer is a proposer and pays the premiums on behalf of employees. The employee is life insured, and the benefit goes to an employer in case of a claim. If an employee dies during the term of the policy, then the employer will receive a death benefit. Furthermore, it compensates financial loss to a key employee’s family that will help manage difficulties to a large extent.

What are the benefits of keyman insurance?

Here are the top 6 advantages of Keyman Insurance Policy as mentioned below:-

  1. Helps overcome financial losses: keyman insurance policy enables businesses and organizations to overcome financial losses when a key employee dies prematurely. In addition, it provides compensation to an employee’s family by addressing the essential needs. 
  2. Boosts the morale of employees: The policy plays an essential role in boosting the confidence of key employees in a business or organization. Not only that, it gives ways to satisfy their requirements in the insurance coverage process to ensure peace of mind from unwanted problems.
  3. Tax Rebates: The premium amounts paid by employers come under the business expenses category, and they can claim tax rebates on them.
  4. Improves the value of a business or company: Buying a keyman policy provides ways to improve the value of a company or business when acquired by another company. This is because the policy covers the risk of premature death of key employees at affordable rates.
  5. Stability of shares: The keyman insurance offers feasible ways to stabilize the shares of a business or company in case of the death of a key employee. Moreover, it allows an organization to focus more on its goals through the insurance proceeds.
  6. Improves the business credit: The credit of a business or company will affect after the death of a keyman employee when it has availed loans on the keyman’s guarantee. Therefore, having the keyman insurance will help meet such liabilities and avoid a financial crisis.

 

What are the eligibility criteria to buy keyman insurance?

A business or company should meet the following requirements while buying keyman insurance. 

  • The key employee should hold less than 51% of stakes in a company in which he/she is working. 
  • A keyman and his family should hold less than 70% of the total shares of the company.
  • A business or company should provide the role of key employees and prove that their role is critical for the business.

 

What is the sum assured under keyman insurance?

Insurance companies will determine the sum assured amount for keyman based on the following factors.

  • 10 times the actual package of the employee.
  • 3 times the average gross profit made by a company in the last 3 years.
  • 5 times the net profit earned by a company in the previous 5 years.

 

Things to consider before buying keyman insurance

  • An organization or business cannot choose the rider option under keyman insurance. 
  • The employer is the nominee of the policy who is also a policyholder 
  • It is not possible to take loans under keyman insurance 
  • The employers should pay the premiums after choosing the insurance for employees

 

How to calculate the keyman insurance amount premium?

Employers can use the keyman insurance premium calculator online to determine the premium amounts. This will help a lot to make the right decision while investing money. At the same time, they should enter some details to generate the premium amount with high accuracy. The calculator makes feasible methods to know the exact figure of premium values.

What happens when a keyman quits a company?

Organizations should know the keyman assurance meaning before buying a policy from a company. When a keyman quits a company, the first employer should stop paying the premiums and allow the policy to lapse. After mutually agreeing to the terms and conditions, a company can transfer the keyman policy to the new employer. It can also assign a policy in favor of the life assured or keyman.

Where to buy the keyman insurance?

Companies can buy keyman insurance online that will help save time and money. They can compare the premium prices of plans which give ways to select the right one based on their choices. It is wise to know what is the purpose of keyman insurance with more attention before investing money. Not only that, employers should read the terms and conditions properly when purchasing a plan. The keyman insurance policy taxability may vary from one insurer to another insurer in the markets. Therefore, an employer should evaluate them online to provide ways to meet essential needs. The employers should also submit some essential documents such as copies of income tax returns, audit reports, copies of the memorandum of association, a true copy of the board resolution, etc.

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