Home / CA / Key man insurance policy: Introduction, Advantages & Disadvantages

Key man insurance policy: Introduction, Advantages & Disadvantages

Key man insurance policy – Full details. Here we are providing complete details for Key Man Insurance Policy like Meaning of Key Man Insurance Policy, Advantages of Key Man Insurance Policy, Dis Advantages of Key Man Insurance Policy etc. In This Article You can Find Everything related to Key Man Insurance Policy. Recently we also provide Latest Income Tax Slab Rates for A.Y 2017-18 and What is TAN Number and How to Apply online for TAN Number. Now You can Scroll Down Below and check complete details for “Key man insurance policy – Full details


If you like this article then please like us on Facebook so that you can get our updates in future ……….and subscribe to our mailing list ” freely “

Key man insurance policy – Full details

Kay Man Insurance Policy Full Details

Key man insurance policy ,popularly known as key person insurancepolicy is mainly intended for compensating the loss occurred due to the death or the loss that would likely to arise as a result of permanent disability of key income generator of the business. Even though the policy does not compensate the entire loss occurred ,it assist the business with some fixed amount depends on the type of policy.

Many businesses have a keyperson who is responsible for the majority of profits, or has a unique and hard to replace skill set such as Intellectual Property that is vital to the organization. Anemployer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company.

A key person can be any one who is directly associated with the performance of business and whose disability may affect the business adversely.For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skillsor knowledge which is especially valuable to the company.

Key Man Insurance Policy

Advantages of key man insurance :

  1. In case of death of a keyman the company is paid money to cope up with the loss.
  2. Any business concern 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. This policy can be used as either an extra super annuation benefit or an ex-gratia payment to the key employee during the service period. If the company receives the proceeds on maturity, then they are taxable.
  4. No need of giving advanced intimation to the income tax authorities.
  5. The company can also raise loans on the policy from LIC.
  6. For the executives earning high salaries, this policy can be given as a hike in salary and saves income tax.
  7. It becomes a great help to the business for their tax planning.
  8. The directors can also safeguard their immediate family from getting affectedby the vagaries of the industry and the various business cycles that the business has to encounter.
  9. This policy helps to improve the retention of key human resources of the business.

Disadvantages of key man insurance :

1.The amount on claim or maturity under a keyman insurance policy is not exempt under Section 10 (10D) of the Income Tax Act if the company is paying the premiums unless the policy is assigned to key person who himself/herself pay the premium.

2.If the policy is surrendered then the amount endorsed is taxable in the hands of key man as profit in lieu of salary.

Recommended Articles

About VRP

I'm currently working as an intern.I'm passionate about entrepreneurship and technology. Feel free to ask your queries by reaching me at vrp.caknowledge@gmail.com or my Facebook profile.


  1. Sir, I want to share my information recd from other sources. Because of recent rain, most of the cars even high value cars are floated in the water. But Some private insurance companies are paying nearly 90% of the IDE value and the govt based insurance companies are ready to pay only 60% for the total loss of the vehcile. say If a person purchased and insured a vehicle for Rs.5.17Lacs and he will get only Rs.3.10lacs. Balance will be a loss to the individual even after some damages. Why there is a variation. The car selling companies are having tieup with insurance companies. Who will bear the loss.I am also one of the sufferer.>>sekar

Leave a Reply

Your email address will not be published. Required fields are marked *