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🔑 Keyman Insurance Presentation (in Malaysia) - Common Mistakes ❌ you could be making (MUST WATCH) - YouTube
Channel: CF Lieu Channel
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hello everyone this evening from how to
finance money dot come and today's topic is
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a bit different it is it deviates from
the normal norms of the personal finance
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now it's about team and insurance now
this is normally only applicable for
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business owners now in my line of work
I've encountered business owners who
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have made this this common mistakes when
it comes to keyman insurance now what are
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those common mistakes that is what I'm
going to reveal today okay so of course
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I'm CF from how to finance money calm
and do provide services holistic
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financial advisory services
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in your heart so if you are in Penang or
you even in KL you drop me an email so
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can keep in touch so what is the
definition of keyman insurance or
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definition of keyman basically
means you was a key person in a business
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right so you might be a business owner
yourself you might be for a large
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corporation a key man will be people who
are you know chief executive officer may
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be the general manager a CFO or CEO oh
and the likes like that
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so I mean by keyman now it means like
he meant keyman insurance is that it's an
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insurance policy taken out by a business
or company I get a compensate for the
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business for the financial losses now
that's very important this is where most
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mistakes regarding keyman insurance
happen
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it's very mind that a keyman insurance
is a policy taken out to compensate that
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business ok compensate the business here
not anyone but the business for
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financial losses that will arise from
the death or the extended incapacity of
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an important
remember of a business and to illustrate
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this more clearly now assuming that in a
company those very important people is
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director or general manager or c-suite
exec it may have or may not have ownership
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in the company regardless of that if
your position is so important that is
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without you
okay without you in the company the
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business the business profit will be
substantially affected than your keyman
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and that you're eligible you can okay
you're not obligated to but you can buy
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a key man insurance now this how it
works yeah key men because you make a
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lot of money to company once you are no
longer here the company which suffered
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losses all right so what kind of losses
view was talking about it's the fact
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that um losses like credit they were
asking for payment
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okay there's certain projects actor okay
let me delay the management we change
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customer I have no confidence for the
company so what happens if key man is no
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longer here so the money is no longer
foreign flowing in in terms of company
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turnover revenue and the profit will be
definitely affected now even it's a
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company wish to employ someone else to
take over the task of this key man it
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takes time and to build reputation up
and to train a new person to be capable
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as a predecessor so again I stress this again keyman insurance is a resource
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to recover the loss of the company
during the transition period right so
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the the right logic is of course when it
comes to key men was established the
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fact that our team and ensuring the
company the company now is the is
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rightly so to say that if a key man
insurance is taken meaning that the
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company pays for the premium yes okay
the
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pays for the premium where the
beneficiary is of all the payout for any
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pay up in case that teammate is disabled
or dies of course it's the company
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because come the compensate the company
for the losses right and what happens
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next is that this is what what happens
next well the mistakes make and in this
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document to illustrate see previously we
have the right logic and now we have the
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wrong logic that the wrong order is such
now I want to ask you does it make sense
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if a company pays for the insurance of a
key man and then the beneficiary of the
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insurance policy so-called key man
policy actually is payout to the key
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man's family it doesn't make sense right
because again what does the company that
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gets in this kind of transaction the
company get nuts right you get mad I
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mean it's the wrong logic someone pays
the money someone would have to be
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benefit from the money pay but in this
case if the company is not getting the
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payout then essentially this is the
wrong logic no I'm not going into the
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loss yet on how this actually violates
some of the tax laws but again this
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illustrate very simply that is simply
the wrong logic so I say Akim an
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incident now this is one of the mistakes
made by a lot of rookie insurance agent
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now the cell keyman insurance but they
know nuts about basic tax laws right so
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that is why if this kind of thing
happened business owner I mean if the
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Inland Revenue but check this out
depending on how you do your accounting
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because some company they say the
expenses pay out of a pocket of the
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company will be deductible and stuff
like that so you might have done this
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part wrong if you have misinterpreted a
key man insurance so to you
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by any rookie insurance agent
now what detects implication to tech
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talk about the text implication yeah so
for that let's let's actually look at
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what the public ruling by Inland Revenue
Malaysia regarding him--as insurance now
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this this ruling public ruling now it
goes a bit into the law the problem
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explains that deductibility of the
premium insurance premium pay for akima
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insurance and the taxability of the
insurance process received on cement as
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you can see here it's gonna be now even
in this IRB public ruling it defines
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keyman insurance very clearly right it
says that generally premium pay of
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insurance intended wholly and
exclusively to recover the money that it
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would replace the loss of profits on the
happening events in insure against right
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and it's allowable as a deduction
against the cross income of the company
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well yes you can do that but but you see
you say this instrument is actually like
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I say to recover cover the recent loss
of a business income to the company not
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to the key man's family and the right to
the insurance proceeds to the keyman must
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always remain with the end or year of
the company and the profit must not be C
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must not be payable to the keyman
person or his family so that's the thing
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right that is the thing that is the
thing about keyman insurance now I go
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back to here now this will be the text
implication if you are deducting I mean
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the premium pay out of the company
pocket and you were actually deducting
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that from your business expense but the
beneficiary is a
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your family if you are the key man so
this is just not right it's just not
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right it's not how it's supposed to be
you're violating the tax laws right
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these are the implications and what are
the ways when it comes to handle that
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the tax yeah and it attacks when it
comes to the premium pay right so
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normally when this kind of blunder
happen a business owner a business owner
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and the first thing I want to ask is
what type of insurance is your keyman
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insurance what type I mean keyman is the purpose that what type
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we go to the very basic of engine what
type of insurance is a participating or
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a non-participating
insurance right so a participating
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instrument will be participating in the
insurance company profit an on par in
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policies will be non participating in
the insurance company profit now it
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means that if it is okay first thing I
want to know if this is a participating
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policy boy you are over paying for
premium because participating policy or
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insurance are very much expensive right
even a non-participating policies you
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there could be potential for cost saving
if you know what are the kind of
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non-participating the right non power
policies to get so I will advise you if
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a business owner okay you stop
overpaying for insurance because they
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are always cheaper options okay when
they come to keyman insurance trust me
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on that but before we go further this
one another thing that and the show you
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is that comes back to the deductibility
of the premium paid for Kira insurance
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as against a business expense now if I
say one asks very important question is
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because okay it's because a long time or
poly
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you determine where how to handle this
deductibility of premium expense against
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your business expense
now the premium on the policy is
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allowable
okay allowable it means it can be
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deducted again your business expense if
the angel has no element of investment
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and the initial policy is taking the
lackey person who's absolutely resigned
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the production of that are so no element
of investment meaning that what other
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policy development investment a term
life and accident policy I highly
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discourage accident policy because the
payer is only eligible if you died in an
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accident no term life is good because it
covers accidental or natural death or
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TVD now this term only these two kind of
policy it is deductible as a business
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expense correct because there is no
return on the premium pay if the injured
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person lives or not injured okay so like
I say it's allowed for as deduction
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address the gross income from a business
now a whole life policy or endowment
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policy these are participating policy
and what it means fighter even a non pas
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policy in responding they also have
aluminum investment before is regard
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regarded as a capital assets of the
company now both policy have cash value
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that can be redeemed after the universe
for several years now of course for
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endowment and it's the most expensive
type of policy you can ever buy forward
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to good for the purpose of human
insurance as you know and diamond is a
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maturity value of the policy so the
premium pay is not allowable if you
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violate this meaning that you'll violate
IRB taxation law okay get that okay it's
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not allowed therefore before
so again
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one of the things of this public ruling
it says in a case of a control company
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the premium pay for key man insurance on
the lack of a director or employ who own
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shares though if you are the co owner or
a little owner and a company is not an
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allowable deduction not an allowable
deduction right so not again not in
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Alabama allowable deduction so these are
the things that are mine to give
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awareness about to all business owner
when you're talking about keyman
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insurance now again before we read for
today a lot of business when it comes
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when you know this a lot of business
owners of us okay am i all paying for my
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can insurance of course you are
if it is participating policy especially
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now this second question that is very
common is to say that if you're a
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business owner you ask if your company
is paying for the so-called premium
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keyman insurance premium whereby the
beneficiary you check your beneficiary
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and your cell your beneficiary is your
family member so what should you do how
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to correct this kind of overlook or
mistake done by your insurance agent
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okay so if that is the case so does that
mean I have to throw out my own money to
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pay for killing now I said that this
question there are answers and there are
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workarounds about it that you don't have
to find out your money to keep favored
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the key men you say how now if you you
find this useful and you would like to
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seek further advice on how to properly
structure keyman insurance our urge you
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to send an email to me out there that
how to finance money calm or if you are
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watching that in the blog post below
drop your contact details below in the
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Google Google Forms if you have actually
reading this in my website Housing
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Finance money.com and I could actually
advise you on
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for the steps to take if you can relate
to what we have discussed today and you
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realize there is mistakes and you would
like to fix this kind of mistake so the
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sampling from housing finance money comm
and we should have a good day
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