Key Person Insurance: Is your Business Covered?
What is Key Person Insurance?
Key Person Insurance also known as Key Man Insurance is a life insurance policy on an employee that is deemed as vital to the ongoing success of a business. If that employee dies, the business receives the death benefit.
Basic Partnership Example:
Jenny and Audrey are business partners at an internet startup. Both are vital to the ongoing success of the business. If for any reason one of them were to die, the business would suffer dramatically in the short-term. To protect against this, Jenny takes out an insurance policy on Audrey and names herself as the beneficiary. Likewise, Audrey takes out an insurance policy on Jenny and names herself as the beneficiary. In this way, the business has protection.
The owner of a software company wants to insure the business against the potential death of his most skilled programmer and also against the potential death of his most skilled salesman. Both employees are instrumental to the success of the business. The owner makes sure that life insurance policies are taken out on both of these important employees and names the corporation as the beneficiary of these policies.
Term Life Insurance as Key Person Insurance
The type of insurance that is a great fit as ‘key person insurance’ is term insurance. There are three reasons for this.
1) You can set a length of time for how long you want the policy to last.
2) Term insurance is relatively inexpensive compared to Whole Life Insurance.
3) The policy can be dropped for any reason at any time. For instance, if the key man leaves the company or the need for the policy simply no longer exists, the business can simply stop paying the premiums and effectively drop the policy.
Key person insurance is beneficial to many different types of businesses including but not limited to partnerships, corporations, family businesses, law firms, small businesses, sole proprietorships, etc. The policy can be customized in terms of the length of time the policy lasts and the amount of death benefit provided, so as to fit the needs of each business.
Free Quotes and Personalized Service
At Secure Term Insurance we are insurance brokers offering free quotes and personalized service with step by step guidance throughout the application process, underwriting process, and any assistance you may need thereafter. Contact us today and get the coverage that is right for you!