Why Your Business Needs Key Person Life Insurance Coverage

Photo by cottonbro studio

Key Person life insurance is a type of insurance policy that provides financial protection for a business in the event of the death of a key employee. In this blog post, we'll take a closer look at what Key Person life insurance is and how it can benefit a business.

1. What is Key Person life insurance? Key Person life insurance is a life insurance policy that is taken out on the life of a key employee. The policy provides a death benefit to the business, which can be used to cover costs such as recruiting and training a replacement, lost revenues, and other expenses that may arise in the event of the key employee's death.

2. Why is Key Person life insurance important? Key employees are often critical to the success of a business, and their death can have significant financial implications. Key Person life insurance can help to protect a business from these potential losses, providing a financial cushion to help the business recover and continue to operate.

3. Who can be a key employee? A key employee is typically someone who plays a vital role in the business, such as a founder, CEO, or key salesperson. They may have specialized knowledge, skills, or expertise that are critical to the business's operations and success.

4. How does Key Person life insurance work? When a business takes out a Key Person life insurance policy, it typically pays the premiums and is the beneficiary of the policy. If the key employee dies, the business receives the death benefit from the policy, which can be used to cover the costs associated with their loss.

5. Are there different types of Key Person life insurance? Yes, there are several different types of Key Person life insurance, including term life insurance, which provides coverage for a specific period of time, and permanent life insurance, which provides coverage for the entire lifetime of the key employee. The type of policy that is right for your business will depend on your specific needs and circumstances.

6. How do you choose the right Key Person life insurance policy? Choosing the right Key Person life insurance policy for your business will depend on factors such as the size and nature of your business, the importance of the key employee to your operations, and your overall financial situation. It's important to work with a qualified insurance professional who can help you to understand your options and choose the right policy for your business.

In conclusion, Key Person life insurance is a valuable tool that can help to protect a business from the financial impact of the death of a key employee. By providing a death benefit to the business, Key Person life insurance can help to cover costs such as recruiting and training a replacement, lost revenues, and other expenses. It's important to choose the right policy for your business, and to work with a qualified insurance professional to do so.

Top 5 Reasons You Need Life Insurance

OK, let’s talk. I know, talking about life insurance usually isn’t the most fun thing to talk about, but it is one of the most important aspects of your financial plan if not the most important. Talking with an expert regarding these matters can surely help lighten the load with what is needed to make a good decision in these matters.

I have been very lucky to know and meet a lot of absolutely wonderful people from all walks of life. And with knowing many people, your chances go up with knowing more people that have passed away. It is always hard to see friends and family stress about money during trying times like this. Seeing many of these types of circumstances is one of the many reasons why I chose to get involved in the life insurance industry. I am passionate about helping people get prepared, so when the unexpected happens, family and friends will not have the financial stress that comes shortly thereafter.

This article will outline just 5 of many reasons why you should have life insurance as part of your financial plan.

     1. Funerals aren’t cheap.

According to the most recent data from the National Funeral Directors Association, the average cost of a traditional funeral, including embalming and a metal casket, is almost $6,600. From my research, that represents a more basic casket. Most statistics out there say it is usually closer to $10,000 and in many cases higher. Most people don’t have an extra $6k-$10k or more to dedicate to funeral costs so they usually have to draw money prematurely out of a 401-k, savings, fundraise for it or go into debt paying for it. Don’t leave it to your family to deal with the added stress of coming up with money to pay for the funeral.

2. Take care of business.

Life insurance is a very important part of the small and large business equation. Having been a business owner throughout my life, I can relate with the stress of wondering what would happen if the unexpected took place. Ask yourself some of these questions: What would happen if a key employee dies or becomes disabled? What happens to my business and my family if I die? What happens with the structure of the business if a business partner dies? These are just a few things to think about when owning a business and to take the proper steps in protecting yourself and those dependent upon you.

3. Supplement retirement.

How do you supplement retirement with life insurance you may ask? Certain life insurance policies (Whole Life) in particular, have both a death and a living benefit. These types of policies can accumulate cash that can be borrowed at a later time for cash needs. These types of policies are also usually protected from creditors, have a premium payment that is guaranteed to never increase, tax-free access to your funds as well as a myriad of other features and benefits.

4. Peace of mind.

Having a life insurance plan gives you the piece of mind that whatever happens to you, that you have a plan in place to care for loved ones that are left behind. You can also allocate some of the proceeds to your favorite charity if you wish. Just knowing that business will be taken care of and that you are leaving a legacy behind is a good feeling to have.

5. Nobody gets out of this world alive.

My grandmother used to say this and it made light of a sad situation. With this obvious knowledge, it is nice to have a plan in place that will not only take care of funeral expenses, but also pay off debts, a mortgage, take care of rent for a couple of years, pay for a college education, and the list goes on. In addition, life insurance is usually a lot cheaper than you think.

Don’t hesitate on getting something set up to protect the people you love. It can make all the difference in the world.