Key Person Life Insurance
Your business can't afford to lose its MVP
Key Person Life Insurance is a life insurance policy purchased by a company on the life of the business owner, top executive, partner, or anyone else who is critical to the success of the business.
WHAT IT IS
The company (not an individual), purchases this policy on a specific employee. The company pays the premiums and is both owner and beneficiary on the policy. If that key person were to die, the company would receive the proceeds from the policy.
What can the death benefit pay for?
The money can be used for a wide-range of things, including:
- Recruiting, hiring and/or training of a replacement employee
- Pay off business debts
- Pay investors
- Buyout the surviving family member’s ownership (as part of a buy-sell agreement)
- Off-setting day to day operations
- Supplementing lost revenue
- Costs associated with closing the business
WHY IT IS USEFUL:
-Your business will not suffer if a key person in your operations passes away
-Can include a disability rider
-Buys the company time to hire and train a replacement, or make necessary changes to save the business
The amount of coverage you need depends on the size of your company, the type of business that you run, and the key person’s role in the business. And – just like regular life insurance, the cost of coverage varies on the age and health of the person the policy is being taken out on.
If there is a situation in which the absence of a person in your business would cause major financial harm to the company, Key Person Life Insurance should be purchased.