Key Person Life Insurance

You know that your employees help to make your business a successful, thriving enterprise. In fact, you can identify some
employees as “key” to the organization’s ongoing success.  These individuals possess unique skills, expertise, decision making power and vision. Their unplanned absence can disrupt your company’s earnings, productivity and morale. Key person insurance helps you to manage this risk.

What is Key Person Life Insurance?

A key person life insurance policy protects against losses as a result of the death of a key person at your business. The policy’s death benefit provides capital to help the company absorb the absence of the key person. Unlike other sources of capital – such as a sinking fund, a loan, or company earnings -life insurance provides liquidity precisely when the need arises: upon the death of a key person. Further, disability riders are  available that can waive premium payments in the event of the insured’s total inability to work due to disability.

How it works

After working with underwriting to determine an appropriate policy amount, your business pays the life insurance policy premiums and is typically the owner and beneficiary of the policy. As owner of the policy, the business may access cash values, via loans, during the key person’s lifetime. When the key person dies, life insurance proceeds, minus any loan amounts, are  paid to the business and can be used to offset losses. Alternatively, upon the key person’s retirement, the company may decide to sell or bonus the policy to the insured, surrender the policy or simply keep it in force.