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Key Person Life Insurance Policy – Protect Your Business

Safeguard your company’s most valuable assets with Key Person Life Insurance. Learn how this policy can benefit your business.

Protecting Your Businesses’ Most Valuable Assets

As a business owner, you probably didn’t think twice about the need to insure the building, inventory and equipment of your business. But have you overlooked something? How about protecting the business against the loss of its most valuable assets – its key people? That’s where Key Man Life Insurance comes in. In this comprehensive guide, we’ll cover everything you need to know about Key Man Life Insurance, including what it is, why it’s important, how to choose the right policy, and much more.

Key Man Life Insurance offers peace of mind by providing financial protection to your loved ones. With this policy, you can ensure that your family will be taken care of in the event of your untimely death.

This policy is designed to cover the life of a key employee in a business. It provides a tax-free death benefit to the business in the event of the employee’s death. The business can then use this benefit to cover expenses, pay off debts, or find a replacement for the deceased employee.

With Key Man Life Insurance, you can enjoy the following benefits:

  • Protection for your family’s financial future
  • Tax-free death benefit to your business
  • Coverage for a key employee in your business
  • Peace of mind knowing your family and business are protected

Don’t wait until it’s too late. Secure your family’s future with Key Man Life Insurance today.

What is Key Man Life Insurance?

Key Man Life Insurance is a type of life insurance policy that is purchased by a business to protect against the financial loss that would result from the death or disability of a key employee. The policy pays a lump sum to the business in the event of the key employee’s death or disability, which can be used to cover expenses such as hiring a replacement, paying off debts, and ensuring continuity of operations.

Differentiating between Key Man Life Insurance and regular life insurance

While both Key Man Life Insurance and regular life insurance provide death benefits, there are some key differences between the two. Regular life insurance policies are typically purchased by individuals to provide financial security to their loved ones in the event of their death. On the other hand, Key Man Life Insurance is purchased by businesses to protect against the financial loss that would result from the death or disability of a key employee.

Identifying key personnel in a business

Not every employee is equally important to a business. Some employees have skills, experience, or knowledge that are critical to the success of the business. These employees are considered “key personnel” and should be identified and insured under a Key Man Life Insurance policy.

Roles that may be considered key personnel

Key personnel can include anyone from top-level executives to specialized technicians. Some roles that may be considered key personnel include:

  • CEOs and other top-level executives
  • Salespeople who bring in a significant portion of the company’s revenue
  • Technical experts who possess specialized knowledge or skills
  • Partners or co-owners who have a significant stake in the business
  • Employees with exclusive access to sensitive or proprietary information

Assessing the value of key employees

To determine the appropriate coverage amount for a Key Man Life Insurance policy, businesses need to assess the value of their key personnel. This can be done by calculating the employee’s contributions to the business, including revenue generated, expertise provided, and relationships established with clients or vendors.

The odds of an owner dying prior to 65*

A lot can hinge on very few people…

*Assumes owners are all 50 years old. Commissioners Standard, Mortality Table.

22%

One Owner

39%

Two Owners

53%

Three Owners

Why should your business protect its key people?

The primary purpose of insuring a key person is to help the business get through potentially difficult times should that individual die. Depending on who the key person is, the business may need funds to hire and train replacements or reimburse for lost revenue.

Who should be considered?

Owners, VP’s, executives and key salespeople could all be considered for key person protection.

How much protection is needed?

Key person insurance is usually purchased as a multiple of salary.

What’s next?

Key Person Insurance is easy to implement and does not require IRS approval.

The Loss of Key Employees or Owners Can Financially Cripple a Company

With an estimated 86% of U.S. businesses made up of 20 people or fewer, a lot can hinge on very few people.

The figure is even more alarming when you consider the statistics in relation to death before age 65. The probability of the death of at least one of three owners before age 65 is surprisingly high.

FAQs for Key Person Life Insurance

What is Key Person Life Insurance?

Key Person Life Insurance is a type of life insurance policy that provides financial protection to a business in the event of the death of a key employee.

Who is eligible for Key Person Life Insurance?

Key Person Life Insurance is designed for businesses and is available to any key employee within the business

What is the coverage amount for Key Person Life Insurance?

The coverage amount for Key Person Life Insurance is typically determined by the business and can vary depending on the employee’s role and responsibilities.

What happens to the death benefit if the key employee is still alive at the end of the policy term?

If the key employee is still alive at the end of the policy term, the policy will expire and no death benefit will be paid out.

Challenge what’s possible with your benefits program.

We apply insight and experience to drive more value, and deliver better outcomes from your benefit programs that result in improved control and program costs.

The Horton Group is an experienced leader in the employee benefits and health insurance field.  Our team has managed hundreds benefit programs with a focus on keeping our clients costs below comparable levels experienced by other employers. Horton’s aggressive management technique includes a number of internal medical management techniques and preventive health initiatives.

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