Key Man Life Insurance Quote
Key
man insurance, a.k.a. key person insurance or key employee insurance is coverage
that will protect company in the case of an untimely death or disability
of a top salesperson, executive or business owner. Key man insurance provides
peace of mind to business owners and shareholders alike knowing that the
business can continue operations without major disruption in the event of
the loss of a key employee. If death or disability strikes your company,
key person insurance may be the difference between the company’s demise
and its ultimate success.
Many people and especially insurance agents themselves make the mistake of thinking key man insurance is simply life insurance. Yes, life insurance is one of necessary elements of a good key man insurance plan, but in most cases key man disability insurance is equally important. While the risk of death is always present, with most ages the risk of disability is much higher. Therefore, to achieve adequate protection, most companies should secure both key man life and keyman disability on their key employees and executives.
How
Does Key Man Insurance Work?
Businesses and business owners regularly use life insurance and
disability insurance to protect themselves from the risks associated with
the death or disability. Using life and disability insurance, a business
can buy policies on the key employees to cover the amount of funds needed
to adequately replace them in the event of a death or disability. In most
cases, the cost associated with securing key man insurance policies is very
small relative to the potential benefit if a key worker dies or is disabled.
With
both key man life and disability insurance, the business secures the policy
on the life of the key person. It will own the policy, pay the premiums
and be the beneficiary in the event the key employee dies or is disabled.
The premium payments made by the company are not tax deductible but in
most cases, the proceeds received are income tax free.
Key person insurance policies are designed to protect the business not the
key employee. If a key employee dies or is disabled, the policy proceeds
can be used by the company for any purpose. Normally, businesses will use
the funds received from a key man policy to cover expenses associated with
finding capable replacements or to cover short term revenue deficits.
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