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How to save with key-man insurance policies

by , 04 November 2013
You took out key-man policies on the life of employees or directors who play an essential role in your business. But did you know key-man insurance policies can help you save your business money too? Read on to find out how ....

Key-man insurance policies can help your business save money.

That's right. The good thing about key-man insurance policies is that if your key-man or woman dies, the insurance you take out on their life would ensure your business continues without experiencing a fatal turn. You, the employer, are the beneficiary of this policy.

Are you allowed a special deduction on your key-man policy premium?

According to the Practical Tax Loose Leaf Service, if you, or any person or company trading within South Africa, take out an insurance policy:

  • On the life of an employee, or
  • On the life of a director or member

An allowance can be deducted from your income for premiums (cost of the insurance policy) paid.

But to qualify for the deduction:

  • The policy must belong to you, the employer, and
  • You must be the beneficiary.

Keep in mind that if, say, your company takes out a policy in the name of one of its directors or employees and the policy isn't the property of your company, the premiums won't be deductible.

The premiums paid by your company can, however, be deducted and the premiums can form part of the 'remuneration' of the director.

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