Key person insurance is the life and disability insurance policy on an important employee on whom the successful operations of a business depends. The beneficiary of this policy is the business in question, and it is procured for business partners, proprietors or owners. Small businesses usually have only a few key employees, who are typically the founders. Without these personnel, the business will lose its worth and their absence would affect the success of the company.

Who Is a Key Person

In order to rightly determine the key person for any organization, these considerations should be kept in mind:

  • A key person drives exorbitant amounts of revenue and profit to a business.
  • This person as specialized talent and knowledge about the business. For instance, an employee who has developed a patented product or brand for the company is considered a key person.
  • A key person’s replacement is not only costly but difficult to find as well. Training another employee if a key person is disabled or suffers death is expensive.

How Does A Key Person Insurance Policy Work?

Key person insurance policy is procured on the life of crucial employees by a company. The company pays insurance premiums and is the beneficiary of this policy. If the key person dies or suffers a fatal injury, the company will get the payoff. The main reason for this policy is that it protects the business from getting bankrupt if a key person dies unexpectedly. The insurance policy will cover financial losses and expenses that may result when a key employee or stakeholder becomes disabled or dies. Benefit payments are used to cover expenses, such as utility bill rents, employee salaries until the replacement is discovered and the company runs smoothly once again.

Do You Need Key Person Insurance Policy?

Key person insurance policy is extremely vital even if your business is in the nascent stages. It is essential to introspectively observe your business regardless of the size. Have you thought of a succession plan? Even if you have a successor, getting the business back on track is difficult. If you have key employees with the knowledge on specific technology that is essential for the productivity of your business, then this policy will keep the business afloat until the right replacement is found. Therefore, consider all the irreplaceable and indispensable personnel involved in your business — account managers or a person who handles important clients. You do not require key person insurance policy if you are the sole proprietor and there aren’t any vital employees. If you have a spouse and children, and you are the sole owner, then you will require a personal life insurance policy.

The amount of the key insurance depends on the worth of your business and your affordability. In most cases, the premiums are not tax deductible. Additionally, key person insurance policy may also cover executive medical reimbursement plans, through which crucial employees are compensated for health benefits that are not included in the regular insurance policy.

For expert assistance and to learn more about Key Person Insurance Plans call JS Benefits Group on 877-355-6070.