1. Who is the key-man of an organization?
2. What are the problems that the organization may face, if the key-man don't live?
3. What are the benefits for the organization from this key-man policy?
4. What is the most cost-efficient way to cushion this problem?
5. How much will the organization have to pay to prevent this problem?
6. Can the premium be deductible from Income Tax?
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| Every successful organization has one or more key persons whose personality, skill, knowledge, ability, experience, drive or leadership would be vital to the success of the business. It could be the Chairman, Managing Director, Sales Manager, Accountant or Personnel Manager. Whoever he is, the reality is that in the event of his death or permanent disability, there will be a major setback to the business. The loss of such a person is a definite threat to the profitability of an organization and such a risk can be undertaken by an insurance company instead of being a burden to the owners of the business. A company would usually face one or more of the following problems if a key-executive should not be available: * The cost of replacing the key-executive including offering the new person the right remuneration. A key-executive may also be the Chairman or Managing Director and one whose personality is highly respected and regarded by bankers and others who do business with him. In such cases, the loss of such a person will create further difficulties for the organization: * Suppliers, creditors and bankers will tend to be hesitant and anxious as to the future Key-man life insurance is basically owned by the company on the life of the individual and the company itself is the beneficiary. The insurance policy becomes a business asset and cash values (if any) are indicated on the balance sheet. Life insurance through a key-man policy will provide the business with funds to: * Keep the business running. With reference to the tax implications of premiums paid by the company the following general principles apply: * If the premiums are treated as a business expense, the proceeds of the policy, For more detailed information, one must seek advice from a tax consultant or a competent life insurance agent. Recent surveys have clearly shown that the human factor in any organization is directly responsible for its success as a business. It is the single-most dorminant and crucial factor in any organization. Due recognition must be given to this aspect of the business and every organization must therefore take the necessary steps to minimize the loss of key persons as a result of death or permanent disability. The simplest and most cost-efficient way is through the purchase of LIFE INSURANCE on these key persons. : The premium for RM1,000,000 can be as low as RM7.48 per day for a key executive age 30.
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