Life insurance is the insurance given to life and available in different format by different insurance companies. There are some of the policies, where insurer is one person and the insurance coverage is for another person. One such insurance policy is in the form of Key Man Life Insurance Policy. There the insurer is the managing director of a company or an employer in one word. The insurance will be on a key person and that is known to be the key man. You do not have the idea about the full policy. If you have also that idea, then also the advantages or the disadvantages of the policy is not known to you. Here are the details related to the advantage and disadvantage of this particular policy.
Advantages in a nut shell for the company for availing Key Man Policy cover
- If the key person dies, the company is going to get the money back and that will help you to bear the loss, that you are incurring.
- The investment of the company in this particular insurance policy will be getting a deduction in income tax, under the section 37(1). This is going to add value to the company in either way. In other way, you must make it a point that the return from the insurance too is left out from the income tax.
- In the income tax reduction, there is no need for additional acclamation from the Income Tax authority. This is going to make sure that you will have to consider less hazard while paying the premium payment. The premium value is auto intimated to the income tax department and hence the update is automatically made.
- The use of this policy can be made at the time of retirement through a benefit of superannuation or even through the ex-gratia payments. The amount that is received, if the employee dies is free of tax, but the amount that is received after the maturity is taxable.
- Loans can be raised on the amount that has been paid to the company as premium and you can pay the loan with an interest rate of 12%.
- Two things are to be confirmed here. The first one is the turnover of the employee has to be restricted, since the insurance company is paying that much amount for the employee’s death. The second thing is that you will have to ensure the loyalty for the employee too.
- For high income executives, you can include the amount of maturity value in the hike of their salary and thus you can save the tax amount that you will be paying to the income tax department.
- Tax planning, according to Key Man Life Insurance Policy is also assisted with this insurance policy. This is the additional support that the policy is going to give you.
- The directors and their families can be safe guard with the help of this insurance policy. This is going to give the perfect support in all possible ways. The different conditions a company faces can be avoided by this policy in the best possible style.
- Financial loss and the chances of that is least in this case.
- The loan that can be availed from the insurances can be used in the different business related expenses of the company.
- The premium that has been paid by the company will not be regarded as a perquisite by any chance. To avail the support, the competent authority must be interpreting in the entire function.
- If you are looking for the different scopes to retain the employee in the company, you can use this policy for the same purpose.
Disadvantages for the company
- The policy amount or the maturity value is not to be considered as an exempt for the general 10 (10D) tax exemption. The premiums are not under the provision of the Income tax exempts. However, when the policy is to be handed over to the employee and if he pays the amount, the amount will be regarded as tax exemption.
- If the policy is surrendered and endorsed to the employee, the amount is taxable under the section 17 of the IT act. The amount will be regarded as the profit in lieu with the salary.
With all the above detail related to Key Man Life Insurance Policy, you can easily understand, how you are going to handle the policy. This is the best support that you can avail, since all the details regarding the advantages and disadvantages are regarded here. To get more information about this insurance you can contact the leading broker firms of the industry dealing in different format of insurance for life.