What is Key Man (Life) Insurance?
Protection for your business. Key man insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business–the ones whose absence would sink the company. You need key man insurance on those people! Here’s how key man insurance works: A company purchases a life insurance policy on the key employee, pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives the insurance payoff.
Why you need Key Man Insurance?
Just in case. The reason this coverage is important is because the death of a key person in a small company often causes the immediate death of that company. The purpose of key man insurance is to help the company survive the blow of losing the person who makes the business work. The company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, buy back shares, distribute money to investors, pay severance to employees and close the business down in an orderly manner. In a tragic situation, key man insurance gives the company some options other than immediate bankruptcy.
How do you determine who needs this insurance? Look at your business and think about who is irreplaceable in the short term. Think of how much money your business would need to survive until it could replace the key person, come up to speed and get the business back on its feet. Buy a policy that fits into your budget and will address your short-term cash needs in case of tragedy.
If the insured has a medical condition which would be considered “Special Risk” we will still be able to help. Safely Invest Financial Services specializes in writing “Special Risk” life insurance.