What is Key Man Insurance?
Keyman or key man insurance is a business insurance. A key man insurance is used to ensure continuity of cash flow for the business. In the event a key man, key person or important key revenue earner for the company is disabled or dies.
The keyman insurance tax deductible is governed by the income tax laws of Malaysia. Download this guideline from LHDN or at the end of this article.
A keyman or key man or key person could be a key employee, shareholder or owner of the business or company. In the event an unfortunate incident happens, such as an accident or disease, resulting in death or permanent disability of the person, the business will be severely impacted from possible drops in revenues or income.
The Keyman Takaful insurance is an Islamic compliant keyman insurance policy. This is based on the AIA A-Life Signature-i (ALSI) plans. These can include benefits payments from the Takaful Disability and Critical Care riders.
The A-Life Signature-i is a Syariah compliant fixed regular plan which covers death and total permanent disability (TPD). The minimum coverage amount is RM500,000.
AIA Insurance and Takaful Agent
Ask Levine Lee now, our Red Cover experienced insurance advisor, for a quick proposal for your estimated keyman protection and risk needs.
Why do we need Keyman Insurance?
The business needs to survive and continue beyond this impact. The business success and business continuity depends on continued income to cover the income lost.
To offset this possible loss of profit or drop in income, the company purchases a life insurance policy on that key person. This key man life insurance policy can be an accident policy, term life, whole life insurance policy or the highest paying policy, the investment-linked life insurance policy. The AIA insurance protection plan with low premiums is the term life policy.
The company will be paying the premiums for this risk, the key man risk insurance policy. And the beneficiary is the company.
The insurance proceeds can be used to pay off debts, distribute as income and to be used as how the company sees fit. Under Malaysian tax regulations, the proceeds cannot be paid to the key person or their family directly.
There are other tax implications. If the keyman insurance is an accident or term insurance, then the premium paid is allowed to be deducted as an expense. Do note that there must be zero investment elements in these policies. However the proceeds will be taxable because the premiums were deductible earlier
If the keyman insurance is whole life or investment-linked insurance policy, the premium paid cannot be deducted as an expense. This is because there is an element of investment and it is treated as an asset. The proceeds will not be taxable.
If the keyman insurance purchased is on the life of a shareholder or business owner, the premium paid by the company is not deductible. This is treated as a benefit for shareholder and their families besides being a cover for risk of business loss.
More details on the inland revenue board’s document on key-man insurance, Public Ruling No: 2/2003.
Ask Levine Lee now, our Red Cover experienced insurance advisor, for a quick proposal for your estimated needs.
What is the coverage provided by a Keyman Insurance?
The keyman insurance is insurance to protect a small business usually. The insurance gives the company cover for the short term loss or impact. So the coverage depends on how much is the calculated business loss. Or how much you want to be covered for. The underwriting process will then depend on the premium payment required.
It must be borne in mind what the keyman brings to the business and company:
- Goodwill for the business
- Sales of products and services
- Bill collection
- Creating profits for the business
- Business success from their experience, knowledge and skills.
The premiums for this insurance is very low to cover for the risk of potential financial disaster to the company and its stakeholders. You have to decide how much you want to be protected for. Then ask us for a proposal. Or ask us to guide you through the process of deciding the coverage amount and premiums.
Ask Levine Lee now, our Red Cover experienced insurance advisor, for a quick proposal for your estimated needs. To better understand the terms and conditions of the various insurance companies, get the estimates in with the proposed policy.
Expert Insurance Agent
Get Immediate Advice
Insurance Planning Expertise – Ready to Help
To know more in details of how to get the best keyman insurance possible, please call Levine Lee. She has over 12 years of working experience with AIA and ING Insurance as an insurance agent and life planner. Contact LEVINE LEE, at +6012 684 0948. She can work with you to create the best proposal and quotation to meet your needs and budget plans.
Key Man Insurance Tax Deductible Malaysia LHDN Guidelines
Or you can download directly from the Tax Department (or more correctly called Lembaga Hasil Dalam Negeri) website per link below.
Latest posts by Levine Lee (see all)
- AIA Maternity, Pregnancy Insurance Coverage Plans Malaysia - 17 August 2019
- Passenger Liability Insurance - 1 August 2019
- AIA Insurance Malaysia - 16 July 2019