Key-Person Insurance

Key-person insurance is used in companies or closely held corporations when circumstances demand that losing a "key" employee could have serious ramifications to the stability or productivity of that company. It can be very difficult for companies to survive the death of such an important contributor to that company's success. Factors such as knowledge of the business, experience, and established business relationships can be very difficult to replace. Such a policy provides a buffer for a company to survive the death of an integral employee.

Five categories of loss:

  • Losses related to the extended period when a key person is unable to work.
  • It can supply temporary personnel and, if essential, to finance the recruitment and training of a replacement.
  • The policy can protect profitability.
  • It can protect shareholders or partnership interests.
  • It can be utilized to help guarantee company loans from banking facilities, whereby, the value of the insurance coverage would equal the value of the guarantee.

An intelligent and thoughtful business plan should always consider the true importance of your employees. Key-person insurance can be crucial to the financial well being and survival of a company.

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