This word is very often used by several Acts. It is even used by Income Tax in provisions dealing with Insurance, deductions of insurance and other related sections as well as rules and notifications issued under this Act. While, there is no legal meaning attached to this word, in general it has the following features.
An employer takes out an insurance policy insuring against loss of profits arising from the death, sickness or injury of a key employee. Needless to mention that the beneficiary is the employer. In the case of a life insurance policy, it is a term insurance, covering the life of the employee within the term of the policy, with no other benefits. Such insurance can cover life of employees as well as partners and other key employees. The term does not extend beyond the period of the employee’s usefulness to the employer. The purpose of taking out the insurance is to compensate the employer for the loss of trading/business income that may result from the loss of the service of the key employee in case of death, sickness or injury.