is paid money to cope with the loss. In the USA, any business concern buying keyman insurance for its employee can claim a deduction for the premium paid for the policy as a business expense under Section 37(1) of the Income Tax Act. Tax deductions may also apply in other countries. This policy can be used as either an extra superannuation benefit or an ex gratia payment to the key employee during the service period. If the company receives the proceeds on maturity, then they may be taxable. (With recent changes in rules, only a term plan is available under key person insurance. Hence, there will not be any maturity benefit.) There is no need to give advance notice to the income tax authorities. The company can also raise loans on the policy from LIC. (On a term plan, no loan is available.) For executives earning high salaries, this policy can be given as a hike in salary and saves income tax. It becomes a great help to the business for their tax planning. The directors can also safeguard their immediate family from being affected by the vagaries of the industry and the various business cycles that the business has to encounter. A key person insurance policy helps to improve the retention of key personnel of the business. Disadvantages The amount on claim or maturity under a key person insurance policy is not exempt under Section 10 (10D) of the Income Tax Act if the company is paying the premiums unless the policy is assigned to the key person who himself/herself pays the premium. If the policy is surrendered then the amount endorsed is taxable in the hands of the key person as profit in lieu of salary. Taxation The tax treatment for premiums paid for key person insurance and the treatment of monies received from a claim vary among countries. Premiums are generally not tax deductible in the U.S. Under the COLI Best Practices Act within the Pension Protection Act of 2006, key person insurance proceeds for policies owned by employers can be taxable if certain conditions are not met. In Australia, key person insurance policies are generally not deductible unless used specifically for business revenue protection purposes. Claim proceeds in Australia if used for revenue purposes may be taxable and, depending on the ownership of the policy, may trigger a capital gains taxation event. In the UK the