Business risk insurance planning is a strategic approach to proactively organize your business operations, minimizing the potential disruption in the event of unforeseen circumstances such as the loss of a key stakeholder due to illness, injury, or even death. It involves careful consideration and preparation to ensure the continuity and stability of your business, preserving its operations and financial health. By identifying and mitigating potential vulnerabilities, business risk insurance planning aims to safeguard the business against unnecessary setbacks, allowing it to weather the challenges and transitions that may arise without compromising its integrity or profitability. It’s a crucial component of responsible business management, emphasizing the importance of proactive measures to sustain the vitality of your enterprise in any situation.
Business Risk Insurance
Keyman Insurance is a Life Insurance policy that a company purchases on the life of an Owner, a Top Executive, or another Individual considered critical to the functioning of the business. Death of such a person would be devastating for the future of the company. For small businesses, the key person might be the owner or founder. Such insurance is needed for the continuity of the business under such circumstances.
In this policy, the company is the Proposer and pays the premiums and avails tax benefit under Sec 37 (1) of the Income tax Act. The Life Insured is owner, a top executive, or another individual. In case of a claim, the proceeds goes to the employer. The objective is to safeguard the company in case of an untimely death of the keyman with insurance proceeds received.
An employer-employee insurance policy is one in which the employer or company purchases insurance policy and the beneficiary is its employees. Presently, This insurance policy is relevant for companies that are run by promoters. It serves as a Tax Saving tool as well as Wealth creation for the Directors and Legacy Planning for the family members of the Directors.
Partnership insurance is a type of insurance that is purchased by partners in a partnership business. It ensures continuity of the partnership business in case of death of one of the partners.
The Married Women’s Property Act, 1874 (“MWPA”) came into effect to help secure the assets owned by a woman against her husband’ creditors, bankers and relatives. The beneficiaries defined in a policy that is covered under the MWPA can be your wife alone, just your child or children, or your wife and children together. As a policyholder, you can assign specific percentages of the sum assured to each beneficiary or divide it in equal amounts.
A Hindu Undivided Family (HUF) consists of individuals who have lineally descended from a common ancestor. In addition to Hindus, even Jain, Buddhist and Sikh families can create HUFs. The concept of a Hindu Undivided Family (HUF) as a separate entity for tax purposes was first recognized in 1917. And over the years, many families have enjoyed tax benefits because of this.
Provisions of the Income Tax Act allow individuals to claim tax benefits on certain payments they make during a year. Similar benefits are applicable for an HUF. For example, an HUF can pay Life Insurance premium for individual members, and claim tax benefits under Section 80C. The maximum amount that can be claimed as a deduction under this section is Rs 1.5 lakh.
