Every business has a key employee or individual who is vital to the success of the company. Perhaps he or she is the CEO with indispensible knowledge and valuable connections or a sales person with a phenomenal track record. In either case the performance of the business hinges on this person. That key person may be YOU.
Nobody likes to think about it, but what happens if the key person dies?
Without key person insurance, the business could suffer significant financial loss or a devastating drop in sales while trying to find a replacement for the key person.
The solution to reduce the impact of losing a key employee is key person insurance (also known as key man insurance). Key person insurance is a policy taken out by a business to protect against financial loss associated with the death of a key employee. The business pays the premiums and is the beneficiary of the benefits.
BENEFITS OF KEY PERSON INSURANCE
Key person insurance is peace of mind knowing the business will be protected in the event of a key employee’s death. Other advantages are:
- Cost of policy can be business expense on company taxes
- Life insurance proceeds are tax-free
- Policies are affordable, especially when considering the value of key employees
Obtaining key person insurance is a pretty simple process. It is a matter of completing an application and a medical exam. Underwriting takes approximately 6 -8 weeks.
Client Real World Example
Mr. Smith was a highly paid senior executive at a technology firm. His skills and industry connections were unmatched. His company spent significant time and money to establish him as a true expert to the company’s customers. The company was growing and showing a profit. One day Mr. Smith was in a fatal car accident. His company suddenly had to find and hire Mr. Smith’s replacement, a process that would take some time. The longer the process, the longer the economic impact and possible reduced profits.
Fortunately, the company had taken out a key person life insurance policy on Mr. Smith. The policy provided much needed financial relief to stabilize the company until Mr. Smith’s replacement could be found.