Keyman Insurance Policy A detailed guide on benefits and eligibility criteria for keyman insurance

Insurance plans safeguard individuals or families from sudden events like accidents, illness, death etc. There are various types of insurances with varying features that offer coverage to individuals and groups to secure them against financial crunches. However, it is important to understand such plans before purchasing them because there are many minute details which are involved and which you should know.

Like individual and family insurance policies,  plans are also available for businesses and groups to cover employees and their needs. As such, no organization can thrive without their employees. And so, it becomes the responsibility of the organization to protect them from unforeseen events. There are many insurance plans that allow employers or businesses to cover their employees under the right plan against untimely deaths or unfortunate incidents. All they need is to research well and buy the best plan to suit the requirements of the organization and their employees. One such type of insurance is the keyman insurance plan, which we are discussing in this blog.

What do You Mean by Keyman Insurance Policy?

A keyman insurance is a plan that is purchased by the employer of a company or business for their employees. In this case, the proposer and the premium payer of the policy is the employer and the insured person is the employee. So, a key man policy is ideally meant for an organization who want to secure the lives of their employees against the risk of unexpected incidents, accidents or death. Under this plan, the employer proposes the policy as well as pays the premium to secure their employees from risks. Hence, the life insured under these plans are the employees, while the benefit of claims goes to the employer. So, in case there is a death of an employee that takes place during the tenure of the policy, the death benefit will go to the employer. The employer, on its part, compensates the family of the employee so that they can manage their burdens accordingly.

However, it is necessary for employers to know keyman insurance meaning and the terms and conditions of such plans well before investing their money.

8 Benefits of the Keyman Insurance Plan

Below are some benefits of the keyman insurance plans:

1. These policies help businesses to overcome monetary loss in the event of a premature demise of a key employee of the organization
2. The plans allow coverage to the family of the deceased employee by taking care of their essential monetary needs
3. These policies support the morale of key employees in an organization and takes care of their family’s requirements to allow them mental peace
4. Also, under keyman insurance policy taxability option, employers can seek tax rebates under these plans as the premium paid under this insurance type comes under the category of business expenses on which the insured can claim tax rebates
5. They further improve the value of a business, especially during the times of business expansions
6. The keyman insurance also allow steadiness of shares of a company in the event of demise of a key employee
7. It further improve the credit of a company which might be affected due to the death of a key employee
8. Having keyman insurance supports in meeting liabilities and avoid financial crisis

Eligibility Criteria Required for Keyman Insurance

Below are the requirements needed at the time of buying keyman insurance:

1. The first criteria is that the key employee should have below 51% stakes in an organization where the person is working.
2. The second criteria requires that the key employee and his/her family must hold below 70% shares of the business.
3. The organization must prove to the insurer that the roles performed by the key employee is significant and critical for the organization.

4 Key Considerations before Buying Keyman Insurance

1. You must note that under keyman insurance the employer cannot select rider option
2. Under such plans, the employer is not just the nominee but also the policyholder
3. Keyman insurance plans do not allow the insured to take loans under the policy
4. Here, the employer makes the payment of the premiums after considering the coverage for employees

How to Calculate the Premium amount of Keyman Insurance?

To calculate the premium of a key man insurance plan, employers can use a keyman insurance premium calculator online. Calculating the amount will help employers to choose the right policy and take the right decision at the time of investing money under such plans.  To calculate premium amounts with high accuracy, the employer is required to enter proper details, which is used by the calculator to calculate the value.

What will happen to the plan if a key employee quits the company?

• If an employee or keyman quits an organization, the employer can stop making payment of the premiums and let the policy lapse.
• Also, they can come to a mutual agreement with the insurer to transfer the policy to the new employer whom the employee is joining.
• Further, the company can assign the policy in favor of the keyman or the key employee.