KEYMAN INSURANCE
RAHEWAR JEETENDRASINH
(Querist) 07 November 2009
This query is : Resolved
ELIGIBILITY CRITERIA FOR KEYMAN INSURANCE AS PER IRDA GUDIELINES
AEJAZ AHMED
(Expert) 07 November 2009
As per IRDA's website, the last circular issued against Keyman Insurance policies as follows:
IRDA/LIFE/006/2005-06 27th April, 2005
Re : Keyman Insurance Policies
This Authority is aware of some of the aberrations that have taken place in the month of March, 2005 in the matter of sale of Keyman Insurance.
We shall conduct a detailed examination of the policies marketed in March 2005 and shall come out with detailed guidelines on the sale of Keyman Insurance at the appropriate time. In the meantime, it has been decided that only Term Insurance Policy will henceforth be issued as " Keyman Insurance Cover ".
You are requested to ensure that your company follows this circular till fresh guidelines are issued in this regard.
(C.S. Rao)
Chairman
http://www.irdaindia.org/lifecirculars/cirlife27apr05.htm
A V Vishal
(Expert) 07 November 2009
Wondering what will happen to your flourishing business when the 'keyman' - either you or your director or some key persons who, on account of their specialized, skills, foresight and business acumen, bring greater revenues, profits, brand-value to the organization is no longer there. Certainly, the sudden departure of key professionals from a growing organization can have a negative impact on its future prospects.
A Keyman Insurance can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy.
A company purchases a term life insurance policy on the key employee, pays the premium and is the beneficiary of the policy. If that person dies unexpectedly, the company receives the insurance payoff. A keyman insurance policy helps the company survive the blow of losing people who make business happen.
Anybody with specialized skills, whose loss can cause a financial strain to the company are eligible for Keyman Insurance. For example, they could be:
Directors of a Company
Key Sales People
Key Project Managers
People with Specific Skill
Eligibility for keyman insurance
The 'keyman insurance (KMI) is allowed to the employee if he satisfies the following condition;
The 'keyman' should hold less then 51% shares of company.
The total no. of shares of the company held by the keyman and his family should be shares of the company held by the keyman and his family should be less then 70%
The keyman should be literate.
Factors to be considered for insurance cover on key-man's life.
Key-man's qualification.
Experience in different fieldas.
Previous record and service period in the organization.
Is he the only key-man in the specific field or otherwise?
Requirements to allow KMI to the employees firms/proprietary firms:-
Duly filled key man questionnaire
key man's salary proof. Copy of the employment/ individual I T R/from no.16 for last 3 years
audited account of the firms for last 3 years.
Firm's resolution to take K M I containing the name of the key-employees amount of cover. Plan & term. Authorized person on the letter head of the firms duly signed by the authorized person with stamp.
Consent for assignment/surrender max. allowed KMI will be restricted to 10 times of the salary of the financial year as shown in form no.16.
K M I is allowed only on the lives of active partners according to the following conditions:-
Average turnover for preceding 3 years should be more then 5 crores.
Max S.A. is restricted to share capital of key man + last 3 years total net profit (Good will)
Requirements for 'Key Man Insurance':-
Proposal form no.340 signed by the authorized person of the company with the stamp of his designation below his signature.
Duly filled special questionnaire.
Certified copy of board resolution with
consent to buy key-man insurance policy.
giving authority to an invidual to act for and on behalf of the company.
S.A
plan/term.
M H R in specified form by marketing manager/sales manager.
There year's copies of audited balance sheets and P&L accounts.
Necessary medical report from the medical examiner.
There year copies of I.T. returns of the company.
Form to be filled by the key man.
Raj Kumar Makkad
(Expert) 07 November 2009
Nothing to add in the detailed replies of vishal and Aejaz.
Sachin Bhatia
(Expert) 07 November 2009
agree with the above opinions
