The ABC’s Of Key Person Insurance
Key personnel tend to be one to two people that your company heavily relies on. These employees can be anyone from a partner to an operations manager or a site foreman. The contribution of these key personnel is essential to run your company. If one of the key personnel dies, where would you find the financial resources to keep your business up and running until you replace them?
The answer is a key person life insurance policy, which your business will receive all or most of the proceeds. This term may also apply to other coverages used for business continuation purposes, including 1) buy-sell or shareholder insurance which will reimburse partners or investors; 2) debt protection; 3) and revenue protection. You can use the policy benefit to replace lost income due to the unavailability of the key person and recruit, develop, and train a replacement.
The policy’s cash value might be available to your business through a withdrawal or loan, if needed. You could also split the premium and death benefit between the firm and the spouse of the key person to ensure that she or he receives replacement for the person’s economic value to the family. These premiums are not tax deductible.
What’s more, this coverage provides a financial asset that enhances the creditworthiness of your company for commercial lending (by ensuring that the business will remain in business if the key person is out of the picture).
When reviewing packages, get quotes on different amounts,anywhere from $100,000 to $500,000. Take into account what your budget allows versus how much the business would need to survive while you’re bringing a new person up to speed.
Our agency stands ready to advise you at any time.
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