Protect Your Business’s Biggest Asset With Key Person Life Insurance

Running your business has many risks, and you’ve probably thought of many of them. What you may not have considered, however, is that your business has more assets than just the ordinary, physical assets: buildings, cars, machinery, and bank accounts. In fact, your business has human assets as well, and for some businesses, particularly those in the service industry, your employees may be the most important assets of all.

Are you prepared for the possible death of a key member of your team? The loss of this key employee could have a number of very significant results for your business. Key Person life insurance covers an individual who, by definition, is critical to the success of a business. A Key Person life insurance policy may cover a top product designer, an engineer, or a salesperson. The expertise that these individuals carry with them, and the relationships they build for the business, are oftentimes so specialized that they cannot be replaced in any simple manner.

At this point, you may be wondering what Key Person life insurance actually does for your business. In the event of the death of the insured key person, the business is provided with financial stability during the adjustment period after the loss of that key person or executive. It is common for a business to use a Key Person life insurance policy to cover important executives, like the business owner or CEO, or vital employees in case of death or disability.

When your business takes out a Key Person life insurance policy, the business holds the policy, pays the premiums, and is the beneficiary on the policy in the event of the death or disability of the key person. In most circumstances, the premium payments are not tax-free, but the proceeds from the policy may be. This policy does not benefit the key person. A Key Person life insurance policy is designed to keep your business running in the event a vital person becomes disabled or dies. Normally, a business will use the proceeds from the policy to fund the search for a replacement employee or to fund the company and make up for any revenue deficits while the company is temporarily destabilized. Without this policy, your company may be left adrift during an already difficult time.

If you have questions about whether a Key Person life insurance policy is right for your business, speak to your attorney today.

By: R Quade

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