What is Key Man Insurance?
Key Man insurance is coverage that will protect company in the case of an untimely death or disability of a top salesperson, executive or business owner. Key Man Insurance provides peace of mind to business owners and shareholders alike knowing that the business can continue operations without major disruption in the event of the loss of a key employee. If death or disability strikes your company, Key Man Insurance may be the difference between the company’s demise and its ultimate success.
Many people and especially insurance agents themselves make the mistake of thinking Key Man Insurance is simply life insurance. Yes, life insurance is one of necessary elements of a good Key Man Insurance plan, but in most cases Key Man Disability Insurance is equally important. While the risk of death is always present, with most ages the risk of disability is much higher. Therefore, to achieve adequate protection most companies should secure both Key Man Life Insurance and Key Man Disability Insurance on their key employees and executives.
Is your business adequately protected?
In many cases, especially in small to medium size businesses, success depends upon a few top individuals that are flourishing in their talents, skills and experience. These key employees are critical to the long term performance of the company. Losing one of these essential people due to a death or disability can have a damaging effect on any business.
The solution to protecting your business is Key Person Insurance.
Key Person Insurance provides the financial means to stabilize a company during the adjustment period after the loss of a key employee or executive. When death or disability occurs, the business may lose critical management skills and may experience periods of failing sales and productivity. Additionally, significant costs will be incurred by identifying and training the person(s) that have the ability take the place of the key employee lost. If you feel your business would be dramatically impacted by the loss of one or more of your top employees consider purchasing a Key Man Insurance policy to effectively protect you against any and all perils that may occur.
How does Key Man Insurance work?
Businesses and their owners regularly use life insurance and disability insurance to protect themselves from the risks associated with the death or disability. When purchasing Key Man Life and/or Key Man Disability Insurance, a business can buy policies on the key employees to cover the amount of funds needed to adequately replace them in the event of a death or disability. In most cases, the cost associated with securing Key Man Insurance policies is minuscule compared to the potential cost when a key employee dies or is disabled.
With both Key Man Life and Disability Insurance, the business secures the policy on the life of the key person. It will own the policy, pay the premiums and be the beneficiary in the event the key employee dies or is disabled. The premium payments made by the company are not tax deductible but in most cases, the proceeds received are income tax free.
Key Man Insurance policies are designed to protect the business not the key employee. If a key employee dies or is disabled, the policy proceeds can be used by the company for any purpose. Normally, businesses will use the funds received from a key man policy to cover expenses associated with finding capable replacements or to cover short term revenue deficits.
If you are interested in applying for Key Man Insurance, or would like more information, please contact our office at (301) 590-0006.