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Insurance density

• It is measured by premium per head of


population and is arrived at by dividing the
total amount of premiums in a country [or
given market by its population.
• Density is a measure of the reach and spread
of insurance in a given population
Insurance Penetration
• It is given by the ratio of total premiums to
gross domestic product [or premium/GDP].
• Penetration is a measure of the economic
significance of insurance.
• It tells us what portion of an economy’s
income is spent on insurance
Married Woman Property Act 1874
• Sec 6 of MWPA act, provides security of
benefits under life insurance to wife and
children and also allows creation of trust.
• Beneficiary : Wife alone / Wife and one or
more children jointly / one or more children
• Life assured : Married / widower / divorcee
man only
Feature of MWPA
• Each policy will remain in separate trust
• Either wife or children above 18 years can be trustee
• Policy is beyond the control of court of law attachment,
creditors or even life assured. (ie married man)
• Proceeds paid to trustee.
• Policy cannot be surrendered neither nomination or
assignment can be done.
• If no special trustee appointed, then sum secured
under the policy becomes payable to official state
trustee in which the insurance was effectively situated.
Key man Insurance
• Every organisation has a key-man or a group
of key-men directly affecting the performance,
profitability, health and continuity of business.
• Key-man insurance is a life insurance policy
taken on the life of a key-man with a view to
providing liquidity, financial strength and
indemnity to the business organisation in case
of losses on account of death, absence or exit
otherwise of its key-men from the business.
Who can be a Keyman ?
• 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
Insurance value of Keyman
• The insurance worth of a keyman is the lower
of:
– 5 times the average net profit of the company for
the past 3 years
– 2 times the average gross profit of the company
for the past 3 years
– 10 times of the keyman’s annual compensation
package.
Features of Key man policy
• Business protection insurance. Proposer is
company.
• It is a term plan
• Premium paid by company is treated as
business expenses. So tax benefit given under
sect 37(1)
• Death benefit is taxable income for the
company.
In case of Endowment Plan as
Employer-Employee policy
• All claims – maturity, surrender or death benefit received
by the company are taxable. (If it is paid to the employee as
ex-gratia then it is not taxable for company)
• In case of the key official retiring, the company may
surrender the policy for its cash value, or assign the policy
absolutely in favour of the key official.
• In case of an assignment, the surrender value of the policy
at the time of assignment may be treated as perquisite in
the hands of the employee, and taxed accordingly by the
assessing authority.
• Interest on loans taken against an Employee insurance
policy may also be allowed as business expenses
Retention of employee
• This policy is a positive measure to improve the retention of
the key person in the company
• The fact that the employee/director’s life is insured for a
large sum that will be paid by Insurance co, to his family if
he dies, it is bound to ensure loyalty and avoids employee
turnover.
• For the executives earning high salaries, this policy can be
given as a hike in salary and save on the tax outgo. At the
same time, it also helps the company in its tax planning
• This policy can be used as either an extra superannuation
benefit or an ex-gratia payment to the key employee during
the service period. If the company receives the proceeds on
maturity, then they are taxable.
other advantages
• No advance intimation/approval is necessary
from the Income Tax authorities to claim
deduction of insurance premium payment
• The amount on claim or maturity under a key
official insurance policy is not exempt under
Section 10 (10D) of the Income Tax Act if the
company is paying the premiums. However, in
case the policy has been assigned to the
employee and the employee is paying the
premiums, then the claim/maturity proceeds are
exempt under Section 10 (10D)

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