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What is meant by a keyman insurance policy?

What is meant by a keyman insurance policy?

Keyman insurance policy

Every organisation has certain individuals in whose absence the company can go through a great loss. These are certain catalysts in the organization that help the organisation move forward to growth and prosperity. For such people, a keyman insurance policy is available to cover any losses that might incur in their absence. 

For such individuals, the company can buy a keyman insurance policy to cover the risks that might follow. The employer pays the premium for the key person in this insurance to compensate for any financial losses due to the death of that employee. If you’re looking for a financial backup accompanied by empowering the keyman in your company, this might be the right policy for you.

Why does your organisation need a keyman insurance policy?

  • Get back on your feet 

Once you lose a key person in your company, the financial losses can hit hard on you. That is when a keyman insurance kicks in to help you re-navigate yourself back to the top. The sum assured by the keyman insurance can be sufficient enough for you to get back on your feet under wise circumstances. 

  • To save on huge taxes

Under section 37(1) of the income tax act, you can claim tax benefits for the premium as a business expense that can contribute to a lot of savings. So, with a keyman insurance, you are cutting costs on your taxation funds and saving them for greater good!

  • Aids in employee retention

If a keyman exists in your company, the Keyman insurance helps you provide recognition and empower them. By ensuring the person by keyman insurance, you help them recognise their talent within the organisation. This also motivates them to stick around for your company’s growth and the company in turn can prevent them from terminating their employment. 

  • Attracting investors

Investors often get drawn to the companies when they realise keyman insurance has been provided. This enables them to believe that there are fewer chances of financial loss and that the company is ready for any worst-case scenarios.

What are the covers provided?

The keyman insurance can lie under any one of these three options:

  • 10 times the salary of the insured – This option covers ten times the amount of salary that the keyman earns. So, basically when the policy is to be availed, the company gets the amount that is equal to ten times the salary of the insured. 
  • 3 times the average gross profit – This type covers three times the gross profit of the organisation which means that whatever the profit is, three times the same is covered in this option. 
  • 5 times the average net profit – This is another option that the company can prefer where five times the average net profit of the organization is covered. The organization can avail five times the net profit as a cover for their keyman insurance policy. 

Some features of keyman insurance you should know

  • The ultimate bereavement benefit

In case of the death of the key person, the company gets payment equivalent to the sum insured. The keyman insurance policy acts as a safety net for the company to prevent any sudden loss or debt. 

  • To manage loss or debt

A company can face sudden loss or debt. Naturally, it is better to always be prepared for the worst-case scenarios. To make up for any loss or debt, the keyman insurance becomes an armour. 

  • Used as an assurance

Keyman insurance can be used as a guarantee for business loans. To assure a backup, it can be put towards shareholdings or partnership interests.

  • Planning for succession

When an existing keyman is to be replaced in an organisation, the keyman insurance acts as a backup plan for hiring or training the new replacement by not burning a hole in your pockets. 

Considering Pazcare for the policy? Here is all you need to know.

  • Pazcare, which is the best insurtech company helps you procure the best policies at the best prices available in the market. 
  • Helps you choose the right insurer and make the right decision – No more hassling around to find the right insurer for you! Sit back and relax and let Pazcare choose the right insurance for you.
  • With the HRMS integrated dashboard provided by Pazcare, you can manage your insurance without any difficulty. 
  • The 24*7 customer support facility makes it the best platform for your organization. After purchasing the keyman insurance, one should be particular about the after services to be smooth. With Pazcare, these difficulties are made user-friendly and seamless!