At BusinessLifeInsurance.net, we are experts in structuring and securing the lowest life insurance rates for businesses who need key man life insurance.
Most companies have a person whose position is vital to the success of the business. A key man can be an owner, a partner or an employee without whom the business would suffer serious consequences, like:
- A loss of key accounts
- Diminished earnings
- Unexpected replacement costs
- Loss of credit
- Damaging employee moral
Ultimately every business will be in the position sooner or later due to a death, disability or the key person should decide to leave the company.
Let’s discuss how life insurance can fund the loss of a key person.
What is the purpose of Key Man Life Insurance?
The purpose of insuring the life of a key man is to protect the stability of the company from the loss of the key man whether that’s due to a death, disability, retirement or the key man decides to leave the company.
Both large and small companies have people who are essential to driving the success of the business. From operational positions like managing the finances or managing employees to more revenue-generating positions like those in charge of key accounts or sales.
A key man is any person without whom the business would suffer in one way or another. These key people are largely responsible for keeping a company financially stable and may also play crucial role in the company’s credit or perceived strength to investors and employees.
Ways Life Insurance can be used to insure a key person?
There are two common scenarios to consider.
- Scenario #1: The owner and operations manager of a small family owned construction company takes out a key person life insurance policy on his own life. The business is named the beneficiary of the policy.In the event of the owners death, the surviving family members can use the death benefit proceeds to potentially pay bonuses to the employees to finish current jobs and eventually close up the business… Or the family could use the money to keep the business going by hiring a new operations manager to fill the father’s role. The death benefit proceeds could also be used to pay down current debts and therefore free up more credit for the business.
- Scenario #2: Let’s say that an advertising firm has several key people who are crucial to the operations of the business. Don Draper plays a key role in keeping the key accounts for this firm. If Don leaves the firm, so do the biggest accounts.In the event of Don’s premature death, a key person life insurance policy on Don’s life will maintain the company’s financial stability. The advertising firm can hire and train a new “Don Draper” while keeping operations running smoothly even if some of the key accounts are lost.
How much key man life insurance should you buy?
Placing a dollar value on a key employee can be difficult. There are many things to consider, like the employees current salary, net business profits attributed to the key employee and the cost of hiring and training replacement. Be sure to think about all of these situations when determining a life insurance face amount.
Many life insurance companies will let you purchase up to 10x the key person’s salary. Any amount more than that will be an individual consideration, but can be done if properly presented to the life insurance company. Some companies are more lenient than others.
Don’t forget about key man disability insurance
Many businesses (and insurance agents) often forget that disability insurance is just as important as key man life insurance. We’ll always send you a custom key man disability insurance quote with your key person life insurance quotes.
Where can I get key person life insurance quotes?
Call us or fill out our quote request form. We represent over 60 life insurance companies and will find the lowest key person life insurance quotes available.