Key person insurance can help protect your business. An owner, founder, or key employee is valuable to the business, as well as difficult and expensive to replace. The loss of such a person could cost your business valuable clients. Key person life insurance provides death benefits that can help cover losses resulting from the death of a key person in your operation.
What Is Key Person Insurance?
Key person insurance is life insurance on a proprietor, partner, or key employee on whom the business’ successful operation depends. This type of insurance is needed for those people or employees who are crucial to the business, without whom the company could sink.
How Does Key Person Insurance Work?
The company purchases a life insurance policy on a key person or employee and pays the premiums. The company is the beneficiary of the policy. If the key person or employee should die unexpectedly, the payoff would go to the company with the purpose of helping it survive the loss of that key person, whether they be an owner, partner, salesperson, or another employee.
Key person coverage is an asset for your business that contributes to the company’s creditworthiness. The cash value of the policy may also be available through a withdrawal or loan to your business if needed.
Key Person Insurance Costs
The cost of key person insurance depends on how much coverage is needed. That amount can be determined by how much your business would require to survive until the key person was replaced and the business was back up to speed. Our agent at The Russell D. Patten Insurance Agency, LLC in Hermon, Maine, can help you find a policy that fits your budget and will handle your short-term cash needs if an unexpected tragedy should occur.