As a small business owner, you can hire at least one person who is necessary for your success. This person can be a partner or have a unique expertise that is second to none. If this person's exit from the business is planned, you can prepare for the loss and take the necessary measures to minimize the impact. But if the departure is not planned, your company may be exposed to financial risks.
In this scenario, key person's life insurance can protect your business. Here's how it works:
- You buy a key person policy on the key person.
- You are the recipient of the policy and apply for and own the policy. If the key employee dies prematurely, the police will pay you.
- In some cases, IRS guidelines allow tax-exempt dollars from the policy toward finding, hiring, and training a replacement employee, compensation for lost business during the transition, and timely financing of business transactions.
- Depending on the specific language of the policy, it can sometimes be transferred to a retiring key employee as a pension benefit.
- The policy can be used to buy out the key employee's shares or interest in the business.
The premium for the insurance is based on several factors, including the key employee's age, physical condition and medical history. The coverage ratio also affects the insurance ratio.
If the loss of one or more employees should have one of the following consequences, the key person's life insurance may be right for you:
- A decrease in your earning capacity
- loss of a special skill
- A disruption in daily business  Your company is probably like most: one or two of your employees are crucial to the organization's survival. Consider buying the key person's life insurance to reduce the backlash if one of these key people leaves prematurely. Without it, the business and its employees are a tragedy from being in serious financial difficulties.
To get started with your customized solution, contact one of our Licensed Advisors, or Request a Proposal and we will get started right away.