Why is Key Person Insurance Important?

A business’s success depends upon its management, and the death of even one of the top people may turn success into failure, despite how capable the others may be.

Who Can Be Considered a “Key Person”?

Individual whose knowledge, creativity, inspiration, reputation, and/or skill are critical to the viability or growth of an organization, and whose loss may cripple it.

Who Pays the Premiums?

The premiums are paid by the business, which will be the owner of the policy and possess all incidents of ownership. Additionally, the business is named as beneficiary since it is purchasing the policy for its own benefit.

Doesn’t the Key Person Insurance I Already Have Cover Disability?

Key Person Life Insurance protects the business in the event a key employee passes away. Key Person Disability coverage protects the business in the event a key employee is disabled.

What’s the Difference between Total Disability and Partial Disability?

Total Disability is often the key policy provision in the disability income policy. This feature defines the eligibility requirements necessary for an individual to qualify for full monthly benefits. Usually, an inability to perform work is the major requirement in the definition. Partial Disability is a short-term version of residual disability benefits. This policy provision, which also could be available as a rider, pays a specified percentage of the total disability benefit (usually 50 percent) if the insured is unable to perform one or more of the duties of his own occupation.

Which is better, term or permanent?

This will depend on your needs. Permanent policies build cash value and can be used for various reasons. Some examples are emergency funds, vacations, home improvements and education. Term is exactly what it means, there is a term (an end time) and this policy does not build cash value.

How much life insurance do I need?

You will have to ask yourself how much would the family need on an immediate and long term basis. In order to determine how much would be necessary, a Capital Needs Analysis should be done of your financial situation.

Can I take out a loan against my insurance policy?

If you have a Permanent Policy this is allowed by a policy loan provision or a withdrawal provision. The policy loan provision will state that a policy owner can borrow a certain percent of the available net cash value.

Why is a buy-sell agreement necessary?

It is one of the only ways to ensure that your financial, business, and personal goals and objectives as a business owner can be accomplished if any of the following occur:

  • You or a business partner dies
  • You or a business partner becomes disabled