If you rely on at least one key person you might be in desparate need of key man life insurance? A key man life insurance is exactly what the title says it is, it protects the life or lives of key employees that work for your organization. Key Man policies are not restricted by government guidelines so you get to determine who the business would like to insure.
This type of policy helps protect the companies owner and the other employees in case of the death of the highly valued employee or owner. Savvy business people understand the importance of Key Person plans in there overall planning objectives along with long term business succession since the key man could be the person who the business will be sold too.
The business buys a term life insurance policy on the life of the key employee or possibly a cash value policy. the company will fund the policy and they will also own and be the beneficiary. Upon the death of the covered employee the company will receive the death benefit proceeds from the policy. The death benefit is usually used to pay bills, search for a new highly qualified employee, help supply needed cash or as a benefit for the family of your key employee.
How do you know if you need this type of policy or plan to help protect your business?
Read the questions below if you answer yes to any you probably really need to consider a key person plan for your business.
- Could your company withstand the loss of one or more of your key employees from a sudden death or accident?
- How long and how much would it cost to replace your number one salesperson or sales manager?
- How would your clients react to the death of the key employee, what if you lost your valued employee to your competition. would the customers that your key person handles follow him or her?
The probability of your company being affected by one of the above factors is very high if you look at statistics.
How does Key Person Insurance help you or the company when the policy is needed? This type of plan will give your business cash flow when it is needed, customers may leave for a competitor, your creditors will feel more at ease and you have money to hire a replacement.
What are the advantages of a Key Man Life Insurance policy? Business gets to select which employees are included in the plan. Life insurance proceeds are distributed income tax free to the business (typically). Creditors and clients can relax that the continuity of the business is intact. You dont even need to submit this plan to the IRS for approval and the plans are very easy to set up.
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