We have heard about life insurance, medical insurance, property insurance etc but what is this keyman insurance, is the query ringing in many minds after taking a look at the topic. One reason for this innocence is may be because this is nothing to do with the life of a person or for that matter, is not at all related to a human being. So what is this? Who would need this? Why this?
Below is a brief that would clarify all these convulsing queries and doubts.
Keyman insurance-a brief
Keyman insurance, like any other insurance policy, is something to protect somebody against losses. Yes, it is for the businesses and companies protecting them from the irrevocable and irreversible losses due to the loss of an employee. A loss here need not necessarily mean the death of the person but it can also be an extended incapacity of an important person for that business. You can also call it key man insurance or key person insurance. In simple terms, it is nothing but a life insurance cover, a trauma insurance policy for a business. It is very important for all the business establishments to opt for this important and very essential insurance.
Keyman insurance for whom?
Every business considers the services, the contribution, knowledge, and skills of a particular person very important for the constant and unperturbed running and smooth functioning of a business. Their skill set might be most valuable and the business would be in a situation wherein it would become inactive without their support. So such people are considered very important for the business and it is the responsibility of the business concern to provide a cover to them for their continued services to the business establishment. Generally, keyman insurance is a policy taken on such people on their health and life.
Merits of keyman insurance policy
This policy helps to cover up the loss of the key person in the business and hence safeguards it from doom. The premium paid against this policy can be used for taxation purposes. It can be shown as a deduction in the costs sheets. This policy also allows the business to go for some loans on them with the LIC. It is a very safe and efficient medium to maintain the key persons with the business. This is generally given as an addition to the regular monthly salary earned by the key person. So it is like an extra income and hence the employee would get motivated and stay back with the business serving them efficiently with his or her thoughts and knowledge.
Demerits of keyman insurance policy
A tax deduction is, of course, a fabulous merit but it is rebatable only until the payment of premium by the key person himself or herself. On the death of that person, the business might have to bear the premium charges and remember it cannot come for tax deductions. When this policy is closed and surrendered, the further payments become taxable.
Though this might look a little expensive after the period of the key person, it is a good choice to select and opt for it when the key person is in his pink of health, body, and mind because his thoughts and ideas need to be saved and safeguarded for the continuous functioning of the business. Check out this website https://www.mykeymaninsurance.com/relevant-life-calculator/ for further details about Insurance.
The employer tries to insure the services and knowledge of this valuable person under this insurance cover to safeguard himself from the possible losses in the absence of the key person. This policy lasts only till the actual period of the person with the business and expires after his usefulness to the business comes to an end. This policy does not try to cover the actual losses faced by the business due to the absence of the person but tries to compensate the business with a decent amount of money to facilitate the smooth functioning of the business.