Key Person Life Insurance

Key employee life insurance is important.

It is based on the fact that if a key employee dies, the business will suffer. The business will lose the experience of the key employee, and it will lose profits that he or she brings to the business.

Life insurance can be the perfect product to help protect against these risks, plus it is flexible enough to provide additional benefits to the business.

When taking inventory of assets, businesses include buildings, computer equipment, and phones. In other words, businesses value their tangible items — items that can be replaced if lost in a fire or some other type of disaster.

One asset that is often overlooked is employees. Each business, regardless of its size, has an individual or group of individuals who contribute to its success, and without them, the business would have a difficult time surviving.

Like tangible assets, life insurance protection can be purchased on those key employees. Life insurance death benefits can potentially:

  • Provide funds to recruit, hire, and train a new employee.
  • Replace lost profits as a result of the key employee’s death.
  • Provide funds to pay debts or reassure creditors.

Key employee life insurance can do more. It is very flexible.

It can fund an entity purchase buy/sell arrangement or executive benefit program (for example, nonqualified deferred compensation, endorsement split dollar, or death benefit only [DBO] plans, etc.).

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