Key Person Insurance
What is Key Person Insurance?
Key Person Insurance is the purchase of life insurance on an employee who may be critical to the success of a business. This person is typically the owner, but may be a partner, family member or any other valued employee. In this scenario, the company would purchase and own a life insurance policy with living benefits on the life of the key person and would also be the beneficiary of the life insurance policy.
What would Key Person Insurance provide for a Business?
Key Person Insurance is an integral aspect of a business' continuation plan and enables a business to move forward even during a significant life event. As the owner and beneficiary of the policy, if the key person unexpectedly dies, the company will receive a tax-free death benefit. Our plans also include a living benefit, which allows the business to receive a partial or full-accelerated portion of the death benefit if the key person is diagnosed with a chronic, critical or terminal illness.
As beneficiary of the policy, the insurance proceeds are paid directly to the company to cover immediate expenses. These funds can be used to find a replacement person, including salary replacement during the key person's recovery or the recruitment, training and compensation of a new employee. If necessary, these funds can also be used to cover lost revenue, to pay off debts, pay severance to employees, distribute money to investors, or close down the business in an orderly manner. Key Person Insurance gives investors, employees, creditors, clients and customers confidence regarding the viability of the company, and can give options other than immediate bankruptcy.