Key man insurance

Dear Mr. Tan,

My friend bought a Prulink product for himself many years back. The company paid the premium. He is the one of two directors and shareholders of this company. This insurance is purchased under the keyman policy. He is the insured person and the company is named as the owner of the policy.

Unfortunately, my friend met with an accident and is paralysed. The insurance paid out S$800,000. Cheque was issued to the company.

Should this money belong to the company or should it be paid to the insuree? Can this money be held at the company since it was paid by the company and was purhcased as a key-man policy? Or, can this money be construed as gratitous payment to be paid to the family member immediately?

REPLY
It depends on the agreement between your friend and the company. If the company took the policy and pays the premium, the company is the owner. The compnay has an insurable interest in the key man of the company, as the disability of the keyman can cause some loss of profit to the company.

If the company has an agreement with the keyman to pay the proceeds to the keyman or his family, then the payment should be made according to this agreement.