Key person life insurance is a policy that delivers a death benefit to a business in the event of the death of its owner or another crucial employee.
Determining the monetary worth of your key person insurance is more complicated, as there's no universal formula. However, consider the financial impact of losing a key employee on your business.
For example, if you're a sole proprietor buying key person insurance on yourself, you may need enough coverage to help your heirs wind down your business and pay off any outstanding business debts. On the other hand, if you run a larger company and are insuring a critical employee, you might require sufficient coverage to replace the employee's sales income or provide a financial cushion while you search for a suitable replacement.
The ownership and structure of your policy can depend on your company's legal setup. Generally, the company pays for the key person's policy, owns it, and is the beneficiary. The key employee must consent in writing to the company owning the policy.
Suppose you have indispensable key people or individuals whose contributions are so vital that their absence could imperil your business. In that case, key person insurance can supply the necessary money to recover and rebuild in the event of their premature death. Contact our Insurance Agency to learn more about protecting your business with key person life insurance.