Why Your Business Needs Key Person Life Insurance Coverage

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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.

Buy-sell Agreements, why are they important?

Do you and your co-owners have a strategy in place to transfer your business to the right people, at the right time, for the right amount of money? That’s what a buy-sell agreement allows you to do. Having a buy-sell agreement in place can help protect the future of your business.

A buy-sell agreement is an important aspect of your overall exit strategy. It helps create a market for the business when an owner dies, leaves the business, or becomes disabled. When structured correctly and funded with life insurance, and or disability insurance, a buy-sell agreement can help provide a solid start to your business exit plan and the people who depend on the future of your business.

Some of the key protection benefits of a buy-sell agreement includes:

Co-owner: Co-owners of the business get protection by providing them the opportunity and funding to purchase the business interest of a deceased, disabled, or a departing owner.

Business: Protect the business by preventing and/or limiting transfers to parties that might be unqualified or undesirable, by requiring certain restrictions.

Continuation: Minimize conflicts among owners by setting the price and terms of a sale when an owner leaves the business. Depending on the growth of your business, you may want to have the business valued every couple of years or so to be sure the buy-sell agreement has the appropriate funding in place.

Estate: Fix the value of your business interest for estate tax purposes if the price meets the IRS guidelines at the time the agreement was signed. Also, be sure to consult your accountant regarding all tax related questions. The estate tax limits can change.

Family: You and your family can be protected by having co-owners buy your interest in the business for a set price and providing them with the funding to do that if you die, become disabled, or leave the business.

Thank you for reading. For more information about how a buy-sell agreement funding option can work for you, please submit your information on our contact page, or call us today!

Four Simple Steps to Buying Life Insurance

Four Simple Steps to Buying Life Insurance.

It can seem difficult at first, but it can actually be an easy process if you follow these simple steps.

Step 1: Find yourself a trusted life insurance broker. A broker can find you the best policy and best pricing on the market. Since the broker has access to a multitude of companies, instead of just one, it gives you the best chance at finding the best product for your needs.

Step 2: A trusted life insurance agent will do a fact finder to narrow down what your exact needs are. They will explain to you how the different types of life insurance products work, so you are better educated to make the proper decision. After verifying your needs, the agent will make a professional recommendation. They will help you determine which product makes most sense to you. With life insurance, there are two basic types of insurance policies to choose from, and your agent should be able to explain how they work for you in detail. Choosing the proper insurance product is a team effort between you and your agent.

Step 3: Be sure your agent chooses for you a reputable company. The insurance company you choose should have been in business for many years, be financially stable and have strong ratings.

Step 4: Choose how you want to buy. There are many safe ways to buy a life insurance policy especially during this time of Covid-19. Your agent should give you the option to either meet in person (if possible), do the appointment by phone, or do a video meeting online i.e. Zoom. More and more of these meetings are moving to video platforms for the safety and convenience of all parties.

Buying life insurance can be a simple choice with lasting value. Don’t leave your family or your business unprotected, make the decision that can help keep them covered today.