It’s not uncommon for a business to hold key employee life insurance coverage. By insuring their key employee they understand the business may not hold up if one of their key employees happens to die.

When insuring a key employee death is often thought of by a business owner, although disability is often disregarded. With a key employee being disabled they often face the same issues as they would if that key employee were deceased. Some results of disability are:

• Recruiting costs to replace the key employee
• Training Costs to train a replacement
• Lost revenue from the disability of the key employee

The key person disability plan will shield the business by providing finances to help cover the possible lost earnings and the costs of finding and training a substitute.

A number of of these plans offer a replacement benefit which will compensate the company for some percentage of the replacement costs (up to certain limits) for the first 12 to 24 months after the key person’s disability occurs.

Occasionally the key person disability plan will be convertible to individual coverage if the business has no further need for the coverage, the insured needs additional individual coverage and the insured meets certain income and, possibly, physical requirements.

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