Important personal insurance is a life insurance policy purchased by the company through the life of a senior official or other important person. If a person's death could be a disaster for the future of the company, such insurance is necessary. The owner or creator of a small business may be the most important person. When a person dies, the company pays insurance premiums and is the beneficiary of the insurance.
Key man insurance is important, especially for family firms that rely heavily on a few key employees. It ensures that the company can withstand the financial burden of premature death and continue to operate steadily. This important company decision is made easier with lower costs and easier access to premium insurance.

Benefits of key Man Insurance

• According to current tax laws, the premium paid will be recognized as business expenses, and the company will save 30% plus the additional premium on the premium premiums paid for that insurance.
• The quality of important work grows. You have a strong sense of self-worth. A sense of belonging enhances productivity and contributes to the important staff retention.
• Protects company value. For example, if a company is sold, buyers can put a high value on it if they know they have a financial backup (insurance) to cover the cost of closing down an important employee.
• Helps to maintain the market value of a company's stock in the event of a significant loss. The stock price of a company is expected to decrease when the key is lost, but if investors know that any financial losses will be offset by the insurance benefit, they may not be able to sell the shares once and for all.
• It protects the company's safety in the event of the death of a significant employee.

Eligibilty For Key Man Insurance

1. A 'key-man' should not own more than 51% of the company's stock.
2. The total number of shares held by the key man and his family must not exceed 70% of the total number of shares in the company.
3. Proof of the proposed life (key man) who plays a key role in the company's business is required.

Key Man Insurance Tax Features

• In the hands of a key man
  As the insurance benefits the company instead of the key person, the premium paid by the company is not considered a requirement in the hands of the Key Person under section 17 (2) Income Tax. As a result, the key man is exempt from paying the premium tax payable by the company through the life insurance policy to him. There is no maturity or benefit to the commitment to the company or to the Key Man because only time policies can be purchased as key man insurance at this time, and these policies have no donor or maturity benefits.
• In the hands of the company
  Under section 37 (1) of the Income-Tax Act, a premium paid by a Key man insurance company is the corporate business allowance. In the event of a claim (due to the death of the insured person), the claim interest is taxed as the business income in the hands of the company. Death benefits from key man insurance do not pay tax under section 10 (10D) of the Internal Revenue Code.