Wednesday, July 19, 2006
Keyman Insurance is a form of life insurance affected by a company as an assurance to compensate for any financial loss suffered by the organisation due to the death of a key employee. This insurance only accounts for the benefits stated in the plan of assurance and does not cater to the indemnification of any loss incurred. The growth and prosperity of certain organisations are directly associated with the expertise of their technical support and directors. Thus the organisations are bound to face a financial crisis due to the untimely death of such key employees. But the computation of the exact amount of sum assured is never an easy task. The appropriate amount of such coverage is assumed upon the amount of loss to be suffered by the company in the event of a key employee's death including the expenses that the organisation would incurr towards hiring and training a replacement. Thus we may arrive at the Keyman Compensation Package by assuming it to be ten times the annual compensation [Annual total salary + Bonus + Notional value of perks(Invariable 30% of Annual Salary)] offered to the Keyman as the maximum sum assured under the policy.
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