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Protecting Your Business From The Loss Of A Key Person

Key Person Life Insurance

Who is a key person???

A key person is any individual that is vital to the profitability and survival of your business. It could be the owner, top salesperson, controller or anyone else that is important to your business.

Key Person Life Insurance defined

Key person life insurance is a life insurance policy purchased by a business on the life of a key employee or person to the business.

The business owns the life insurance policy and is the named beneficiary. The death proceeds of the key person policy are used to compensate the business for the death of the valued employee or key person in the business. Life insurance cash values, if any, may also be used by the business in certain situations.

Key Person Life Insurance Key Points

Key person Life Insurance provides for a tax free cash infusion into the business upon the death of the key person or employee. Business will continue as usual without any interruptions if a policy is in force prior to the demise of the key person or employee.

Cash values are often used by the business in the event that the key person or employee resigns from their position. The cash value may be used to hire and train a replacement or used as a bonus to attract an excellent candidates for the individual that has left.

Key person life insurance policies may be used as leverage against creditors. In some cases the business may be able to borrow against the cash value of the policy, The existence of the permanent cash values in a key person life insurance policy may make obtaining a loan easier since there is already a from of collateral in place.

Key person life insurance policy cash values may also be used in the event the key person or employee becomes permanently or partially disabled. This occurs in greater frequency due to the fact that statistically chances of a disability occurring are greater than death in our working years.