What is Partnership Insurance?
A business run by several parties jointly is called partnership generally the partners carry on the partnership in their own way. The partnership insurance is given to all the insurable partners in the firm based on partnership Deed, which declares that if any partner dies, the living partners Will have right to purchase the deceased partner's share in the firm. If all the partner of the firm are insured, the partnership firm should have enough cash available to purchase the deceased partner's share.
All the insurable partner are to insured. All firm run partners in partnership has an insurable interest in each partner's life to the extent of the amount of "purchase money' which is needed to be paid on the basis of each partner's share. If any of the partner dies the proceeds will be paid to the firm. For the settlement of the share of the share (in part or full) these proceeds are paid on the legal heirs.
Criteria to be satisfied under 'partnership insurance':-
- Minimum S.A.- Rs. 50,000 and not exceeding the minimum amount of capita brought in by any single partner.
- The lives of be all the partner should be insured simultaneously under partnership of insurance.
- All the partner to be insured must get the insurance in respect of their capital.
- The partnership agreement should have a clause that the partnership can be revoked definitely if a partner dies.
- The difference between the ages of two partner (youngest & oldest) should not be large.
- The policy should mature before the oldest partner gets the age of 75 years.
- At the death of the partner capital must be withdrawn.
- Plan of assurance allowed – Term Plans
- Nomination -not allowed
- Assignment -not allowed, except the partnership is broken and the firm cannot pay the premiums other than the partner's death is caused.
Requirement: -
- Copy of the partnership deed with a clause declaring that if a partner dies, the remaining partners have option to purchase the deceased partner's share on specified term and conditions in the partnership deed.
- Copies of I.T.R. of the firm for last 3 years duly attested by the authorized partners.
- Audited balance sheet and P & L A/c copies for the last three years.
- The copy of audited balance sheet having schedule of partners’ capital accounts.
- Letter of authority in favor of the partner to sign the proposal.
- Proposal form no.340.0
