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)