Key Employee Insurance
Sometimes the contribution of an employee can be critical to the success of a business. It is important to plan ahead for any financial loss that may be incurred should a key person die – disruption in sales or production, cost to fill the position, or the expense of training an employee. Key Employee life insurance is purchased by the business, which is also the beneficiary, to help reimburse the business for economic loss when a key person dies.
Key Person insurance is life insurance purchased by the company on the life of an employee or employees whose loss would have adverse effects on the company. Employees are valuable assets and the loss of some key employees could significantly impact the profitability, stability and progress of the company.
Often times certain employees or executives are hired because of their own specific expertise they bring to the company. Other employees just seem to represent the persona of the business and have earned the respect, loyalty and credibility of customers, vendors, suppliers, creditors, etc. The loss of those persons could result in some business interruption in some fashion. Small businesses are just that way. Those intangibles are what makes many small companies successful.
The objective of Key Person insurance is to financially protect the company from adverse impacts if one of those key employees suddenly dies or becomes disabled. The finances available from a key man insurance policy would:
1.) provide funds to find, recruit and train a replacement
2.) help replace any profits the company may have earned had the employee not died
3.) strengthen the company’s working capital and balance sheet to help assure creditors and suppliers about the continuity of the business.
By owning a policy on the life of a Key Person, you have the following options should the employee terminate:
Surrender the life insurance policy for its cash value (may be taxable)
· Keep the life insurance policy for the eventual death benefit
· Allow the insured employee to purchase the life policy for its cash value or the premiums you’ve paid
· Exchange the life insurance policy to insure the life of another key employee (if the policy contains a provision that allows it)
We have several different Key Person insurance plans including Life Insurance and Disability Income Insurance, please contact us today by calling us at 866-866-2960