Key Man Insurance

What is key man insurance?

Key man insurance is a life insurance policy, held by a business, to cover the life of a vital employee.  Key man life insurance is sometimes called key employee life insurance or key person insurance.

Who buys key man life insurance?

Any business which employs individuals who are vital to the company’s survival (key employees) is a candidate for key man insurance.  Many companies cannot survive the death of a key man or woman because the knowledge, skills, contacts, or business relationships of the deceased are so difficult to replace.  It is most frequent for small-to-medium-sized businesses to find themselves in need of key man insurance, but even large companies may stagger or swamp under the expense of finding and training a replacement for a key employee.  The proceeds from a key man life insurance policy will give your company the time and money it needs to stay afloat while replacing a lost key employee.

Who qualifies as a key man?

The qualifications of a key man or woman depend on your company (and your discretion).  A general description is: an employee who possesses skills, knowledge, contacts, and/or relationships which are crucial toward your company’s continuance but which are very costly or difficult to replace.

Types of key man insurance.

A business is eligible to buy any type of life insurance that a family or individual can purchase.  Which type is best?  Term life insurance is appealing because the key man or woman’s employment is expected to end by retirement age (term life insurance is the most affordable, after all).  However, cash value life insurance is also appealing because it can be liquidated in the event that the key man or woman leaves employment without dying.  Visit our types of life insurance page to learn about your options.

What if the key employee leaves?

Depending on the policy you buy, key man life insurance can provide needed funds even without the death of the insured key man or woman.  Specifically, a cash value life insurance policy builds equity (from your premiums and from interest) for as long as you pay into it.  You can liquidate the cash value insurance policy at any time, for any reason.  The amount of equity your policy builds will probably be much lower than the policy’s death benefit, however, so beware and plan accordingly.

Wait—A business can own life insurance?

That’s correct.  And businesses don’t just use life insurance to protect themselves against the loss of key employees.  Businesses frequently use life insurance as an employee benefit and to fund buy-sell arrangements in a tax-advantaged manner.

How to buy key man insurance…

If you want to shop on your own or just compare prices, fill out the form on this page with the information of the person you would like to insure.  If you find a price you like, you can begin the application process immediately, online.  (There’s never an obligation to buy, even after you apply.)
For specialized assistance or a free, personal consultation, give us a call today at 916-773-3800.