Key Person Insurance

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What is the coverage?

Key Person coverage is an insurance policy that is purchased on a key member of a business (owner, president, CEO, top producer, management, etc). This policy will pay a specified death benefit to the company in the event the insured were to pass way due to illness, accident or disease. The full death benefit would be paid to the business.

What does it include?

Key Person Insurance provides financial protections for rising costs due to the loss a key person, customers who decide to take their business elsewhere, employees may get frustrated and leave the business due to the loss of the key employee, new hires that are required in order to cover the key employee’s duties, and falling profits.

Who should look at purchasing?

A small business that has any employees who would cause a financial loss if they were to leave should look into purchasing key person policy.

Why is it important?

The unexpected death of an owner, partner or key employee can have a devastating effect on a company. Replacing essential personnel of a company could cost a company significant time and money, which could threaten the continuity of your business. That is why it pays to plan for the unexpected. You need a financial blueprint that will instill a sense of confidence for you and your employees. You most likely insure you physical assets as a matter of course. However, it is also critical that you also insure your most valuable asset – your key employees. Income tax-free death benefits may help replace profits lost due to key employee’s death. These income tax-free death benefits can create a cash cushion to keep lenders from foreclosing on business loans, reducing lines of credit or increasing interest costs. The remaining income tax-free death benefits can be used to recruit, hire and train a replacement key employee. The tax-free death benefit is also important to assure customers, creditors, and employees that the business will continue to be financially stable and in a position to keep its promises.