Key Person Insurance

What Is Key Person Life Insurance?

It is life insurance purchased by a business on the life of a valued employee or co-owner. The business owns and is the beneficiary of the insurance, which is used to reduce the financial loss to the business if the employee dies or becomes disabled. (Accumulated cash value may be accessible to provide funding to hire and train a replacement if the employee leaves.)
 

Why Do You Need It?

You probably have your business insured against the loss of buildings and equipment. What about your firm's most valuable assets?  The key executives and employees of your firm contribute to the success of the business due to their contribution resulting from their experience and talent.  If one such individual were to die unexpectedly, profits could suffer resulting in unexpected financial strain.  Key person insurance is designed to eliminate that risk from occurring. Specifically, it can provide a flow of tax-free dollars you can use to:

• Help replace lost profits
• Provide the funds to recruit, hire, and train a suitable replacement
• Help assure customers, creditors and employees of business' continuity
• Pay a tax-deductible death benefit to the key person's family
• It can help keep creditors and lenders at bay, since they know plans have been made to keep the business running.

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Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.