Keyman Insurance in Ahmedabad
Many Ahmedabad businesses run on one or two people: the founder who holds the client relationships, the partner who knows production, the director the bank lends against. If that person dies, revenue drops at exactly the moment the business has to find a replacement, reassure lenders and keep paying salaries.
Keyman insurance is life cover that the business takes on that key person. The business pays the premium and receives the claim, so the money arrives where the loss is felt.
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How keyman insurance works
- ·The business (company or firm) is the proposer and pays the premium.
- ·The life insured is the key person: a director, a partner, or an employee whose skills or relationships drive profits.
- ·If the key person dies during the term, the claim is paid to the business, not to the family.
- ·LIC writes keyman cover on term assurance plans, so there is no maturity value: it is pure protection for the business.
- ·The amount of cover is linked to the person’s contribution to the business, measured from the company’s profits or the person’s salary. LIC’s branch confirms the limit for each case.
How it is taxed
This is the usual treatment; set up every keyman policy together with your chartered accountant.
- ·Premiums paid by the business are generally allowed as a business expense.
- ·The claim received by the business is taxable as business income: the life-insurance payout exemption does not apply to keyman policies.
- ·A keyman policy stays a keyman policy even if it is later assigned to the employee; it does not become tax-free by being handed over.
- ·For partnership firms, CBDT Circular 38/2016 accepts that keyman premiums on a partner’s life are an allowable business expense.
What the branch usually asks for
- ·The business’s audited accounts or income-tax returns for recent years, to show profitability
- ·The key person’s income and existing insurance details
- ·A board resolution (company) or authority letter and partnership deed (firm)
- ·Medical examination of the key person, as per the sum assured
Keyman Insurance in Ahmedabad — common questions
What is keyman insurance?
Life cover that a business takes on a person whose death would hurt its profits, such as a founder, partner or key employee. The business pays the premium and receives the claim, which helps it absorb the loss while it recovers.
Is keyman insurance premium tax deductible?
Generally yes. Premiums paid by the business are allowed as a business expense, including keyman cover on a partner’s life (CBDT Circular 38/2016). The claim received is taxable as business income. Confirm the treatment for your business with your CA.
Is a keyman insurance payout tax-free?
No. The life-insurance payout exemption does not cover keyman policies, so the amount received by the business is taxed as business income, even if the policy was later assigned to the employee.
Can a partnership firm take keyman insurance on a partner?
Yes. A firm can insure a partner as a key person, and the premium is treated as a business expense. If the aim is to buy out a partner’s share for the family, partnership insurance is usually the better fit.
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Check the official terms
Plan features on this page are simplified summaries. Benefits, bonus rates, eligibility and exclusions are set by LIC and can change — always read the current sales brochure and policy document before you buy.