Your people are your most important assets, and without key individuals, chances are that you wouldn’t enjoy the same successes that you do today. Directors, shareholders, CEOs and CFOs, department managers and even integral team members…each of these individuals have helped build your company to the point it is at today. If you were to lose any of these key players, your business might suffer, both emotionally and financially. While key person life coverage cannot stem the grief of losing a valued team member, it can help with the financial losses that come with such an event.
Key person life insurance is designed to compensate individuals for the financial losses that result from a key person’s death, such as the cost of hiring and training a replacement and of meeting the salary continuation obligations to the deceased spouse or family.
This type of insurance works very much like individual life insurance, except instead of the employee pulling out a policy on themselves, the company pulls out a policy on the employee. The company is the beneficiary instead of the family, and it is allowed to use that money for whatever it deems necessary until it finds a suitable replacement. The term of the policy does not extend beyond that of the key person’s employment.