Key Man Life Insurance will supply your business with cash when you need it the most? A key man life insurance is exactly what the title says it is, it protects the life or lives of key employees that work for your organization. Whats nice is if you are the business owner you are also a key man or employee so you may be eligible for coveage on your own life.

This type of policy helps protect the companies owner and the other employees in case of the death of the highly valued employee or owner. Savvy business people understand the importance of Key Person plans in there overall planning objectives along with long term business succession since the key man could be the person who the business will be sold too.

The business buys a term life insurance policy on the life of the key employee or possibly a cash value policy. the company will fund the policy and they will also own and be the beneficiary. Upon the death of the covered employee the company will receive the death benefit proceeds from the policy. The monies are typically used to offset any decreased revenue, pay bills, hire new and qualified replacements and to fund a benefit for the deceased’s family.

How do you know if you need this type of policy or plan to help protect your business?

By answering a few simple questions you should be able to figure out if key man coverage would be a good choice for your business.

  • How would your company be affected if a key person died suddenly or unexpectedly?
  • How would your organization be affected by the loss of one or more of your key people?
  • How would your clients react to the death of the key employee, what if you lost your valued employee to your competition. would your current clients follow your key person?

The probability of your company being affected by one of the above factors is very high if you look at statistics.

How does Key Person Insurance help you or the company when the policy is needed? This type of plan will give your business cash flow when it is needed, customers may leave for a competitor, your creditors will feel more at ease and you have money to hire a replacement.

What are the advantages of a Key Man Life Insurance policy? Business gets to select which employees are included in the plan. Life insurance proceeds are distributed income tax free to the business (typically). creditors and customers can feel at ease knowing that the continuity of the business will not be affected. Lastly these plans are simple to set up and administer with no IRS approval.

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Filed under: Life Insurance

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