Key Man Life Insurance

If you own a small to medium-sized business, securing a key man is very important because his success or failure usually depends on a few key individuals driving your company’s revenue. The loss of one of these seniors to death or disability can destroy your business and ultimately lead to its downfall. Key man insurance is designed to protect your company from the risk of one of these losses and will help provide the funds needed to continue successful operations.

What is Key Man Insurance?

Basic insurance is simply life insurance and/or disability insurance that you buy for your key people to protect your company in the event of sudden death or disability. Key employee or chief executive officer insurance will give you peace of mind knowing that your company can continue uninterrupted if one of your key people goes down. If death or disability hits a senior salesperson or executive, key man insurance can be the difference between keeping your business in place or having to close the doors!

Basic life and disability insurance protects your company and not the main person. Most major insurance policies are purchased by the company with the company being the beneficiary and owner of the policy. With principal insurance, if a key employee dies or becomes disabled, the proceeds from the insurance are payable to your company and can be used for any purpose. Common uses of home insurance policy proceeds include covering expenses associated with finding a capable replacement and providing the cash flow needed for ongoing business concerns.

Does your company need key man insurance?

If your business will be significantly affected (loss of revenue or customers) if one or more of your key employees becomes disabled or dies, you should consider purchasing key man insurance. Businesses of all sizes buy insurance, but it’s especially important for small businesses that have significant exposure in the event that one key man is lost.

Basic business life insurance is also purchased for efficient business succession planning. Basic life and disability insurance is an ideal tool for purchasing benefits for the family of a deceased or disabled owner. In the event of death or disability, the company can redeem the company’s outstanding shares of his or her property effectively paying the fair market value to the heirs while at the same time retaining the current ownership. Many successful businesses have sales and purchase agreements in place funded by life and disability insurance specifically for this purpose.

buy man key insurance

Purchasing prime man insurance is relatively easy and in most cases very affordable. This process is the same as purchasing individual life and/or disability insurance. A simple application for life insurance of the main person is completed and submitted to the insurance company. A routine or “small physical” insurance test is required, which is paid for by the insurance company, along with some financial information about the business. The underwriting process takes about 3-6 weeks and upon approval the insurance policy is issued. Finally, paying the first premium is all that is required to make the coverage effective.

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