Keyman insurance is a policy taken by companies to mitigate financial losses from the death of key personnel, such as executives or project managers. It covers aspects like sales losses, recruitment costs, and delays in projects, with eligibility varying based on company structure and financial performance. The insurance amount is calculated based on various methods, and premiums qualify for tax benefits, while companies have options for retiring key personnel.

1. © One Moment Consultancy LLP 2015
Keyman Insurance for Companies

2. © One Moment Consultancy LLP 2015
reena@stablefuture.in
2
Who is a Keyman?
A man instrumental to either gain or loss of
the company can be termed as Keyman.
Exit of such a key person due to premature
death would in most cases result in
immediate financial loss to the company
Typical examples of Keyman
• MD /CEO
• Directors
• Project Managers

3. © One Moment Consultancy LLP 2015
reena@stablefuture.in
3
What is Keyman insurance?
• Keyman insurance is the cover effected by a
company to compensate the financial loss
suffered following the death of a key member of
the staff in an organization.
• What does the proceeds of Keyman insurance
cover ?
• The loss of sales attracted by his/her ability and personality.
• The loss due to his/her day to day specialized skills.
• The cost of recruiting and training a suitable replacement.
• The cost of delay or cancellation of any project upon which he/she
is working.
• The loss of opportunities for future expansion.
• The loss of stable management and good labor relations

4. © One Moment Consultancy LLP 2015
reena@stablefuture.in
4
Eligibility for companies
Open to all categories of business firms EXCEPT:
1. Proprietorship firms owners.
2. Firms where shareholding of key person is over
51% and Family shareholding of Key person is
over 70%. (Family will include spouse and
minor children only).
3. Company not making profits for the last three
consecutive years.
4. When the profit and turnover of the company
are on the decline.

5. © One Moment Consultancy LLP 2015
reena@stablefuture.in
5
Requirements for Keyman
Insurance proposal
1. Copy of Memorandum & Articles of Association.
2. Copies of Audited Balance Sheets and Profit &
Loss A/c’s for preceding 3 years.
3. Certified true copy of Board Resolution passed
in the meeting of Board of Directors containing
following information :-
• Sum Assured desired
• Name & signature of the person who is authorized
to complete proposal papers
• The use of seal of the company

6. © One Moment Consultancy LLP 2015
reena@stablefuture.in
6
How is the amount of
Keyman insurance calculate?
Directors of Public limited / Private limited Company with at
least 10 employees
• Multiple of Keyman’s Compensation Package: Limited to
10 times of Keyman’s compensation package including
perks. (The notional value of the perks can be taken as
30% of the gross annual salary).
• Gross profit method: Limited to 2-times of average Gross
profit for last 3-years (before depreciation and taxation).
• Net profit method: Limited to 5-times of average net profit
for last 3- years (after depreciation and taxation).
Maximum insurance allowed restricted to least of the
amounts arrived at by above 3 methods & distributed
among all the key persons proposed for.

7. © One Moment Consultancy LLP 2015
reena@stablefuture.in
7
How is the amount of
Keyman insurance calculate?
Pvt ltd company with less than 10 shareholders/employees
Restricted to 3 times of average net profit of last 3 years
Companies where 3 years P/L accounts are not available:
Companies having 2 years P/L account - 2 times of
average net profit of last 2 years.
Companies having 1 year’s P/L account
Maximum keyman insurance allowed will be restricted to
equal to net profit of one year.

8. © One Moment Consultancy LLP 2015
reena@stablefuture.in
8
How is the amount of
Keyman insurance calculate?
Key Man Insurance on the Basis of Loan Liability:
If the company has taken a loan from a bank/financial
institution, KMI to the extent of 2/3 of the loan can be
considered on the life of its Directors
For example, if a company with 3 Directors has raised a
loan of Rs. 1.00 crore, S.A. of Rs. 22 lac under KMI can be
considered on the life of each Director, in general.
Note: Additional documents are required to be submitted
Tax Benefits (for companies)

9. © One Moment Consultancy LLP 2015
reena@stablefuture.in
9
Tax Benefits (for companies)
• Premiums paid by company qualify as eligible
business expenses under Sec.37 (1) of the
Income Tax Act.
• Premiums paid by the company are not a
perquisite in the hands of the Keyman.
• The maturity/death claim amount received by the
company will be added to the business income
of the company in the year of receipt.
Tax Benefits (for companies)

10. © One Moment Consultancy LLP 2015
reena@stablefuture.in
10
What if Keyman retires
prematurely ?
On retirement/premature resignation of
Keyman, the company has following choices
• Company can surrender the policy.
• Company can assign the policy to Keyman,
as policy has no surrender value.

11. © One Moment Consultancy LLP 2015
reena@stablefuture.in
11
Why Keyman insurance?
• Protects against the financial loss in the event of
Keyman’s death.
• The company is able to create an asset for itself
in the form of Sum assured and
guaranteed/loyalty additions.
• Offers substantial income tax relief to the.
• Protects the interest of other employees,
shareholders and customers.
• Keeps the company ’ s position stabilized in the
market

12. © One Moment Consultancy LLP 2015
reena@stablefuture.in
12
How do we add value?
• We listen to you and understand your
needs
• We give you the correct advice whenever
required
• We help you take the right decision
• We negotiate with multiple insurances
companies to provide you with best deal

13. © One Moment Consultancy LLP 2015
reena@stablefuture.in
13
What else can we help
you with?
• Group Health and Life Insurance cover for your
staff
• Personal accident cover for your employees
• Indemnity for CXO, board and decisions makers
• Fire and earthquake insurance cover for your
office
• Overseas Travel insurance
• Setup Group Gratuity plan for your organization
• Setup investment camps for your employees
• Setup home loan camps for your employees

14. © One Moment Consultancy LLP 2015
reena@stablefuture.in
14
Looking forward for
engaging and mutually
beneficial relationship