Key-Person Life Insurance

Does your company have one or more employees who are key to the success of your business?  Most likely you do, whether it is the owner, a partner, majority stockholder, or someone with a high level of expertise.  Their loss or death could mean financial ruin for the company.

Key-person insurance protects the company’s solvency should such an event occur.  Protecting the company not only makes good business sense, but some lenders and investors require it as a way to protect their loans and investments.  Usually the business owns the policy, pays the premiums, and is the beneficiary.  Most often it is a permanent life insurance policy, but term life may also be used.

Premiums are based on a variety of factors, including age, physical condition, health history, and the amount of coverage.  In addition, the business should:

· Estimate the value of key employees.  Consider factors such as projects which would be lost, amount of lost sales, or costs associated with replacing the employee.

· Have a business continuation plan.  Outline how your business will survive a disaster is often required by insurers before they can sell key-person insurance.

From Allbusiness.com, “The Value of Key-Person Life Insurance.”