 Key
Man insurance protects the business
Retain
key employees with key person life insurance
Key
person insurance advantages
Uses
for key man insurance
Key
Man Insurance- A Simple Business Protection
Key man insurance is a simple solution to a potential catastrophic
problem. It is an inexpensive tool to protect a corporation
or other business entity from the damaging effects of the
loss of a key employee or business owner. It is also a
logical way to insure that a business can retain options
if a key employee dies or is disabled. The options provided
by key man insurance may include hiring and training a
replacement employee, paying the businesses debt and liquidating
the company, or selling the company at fair market value.
Without key man insurance in place, most businesses have
no option other than to close the business or sell it to
a competitor at a significantly reduced “fire sale” price.
There is no reason to postpone planning for this potential
crisis. The relatively low costs to acquire key man protection
make purchasing this insurance an easy decision.
For more information, also see “What
is Key Man insurance” or “Who
needs Key Man Insurance?”
Retain Key Employees with
Key Executive Life Insurance
One use of key man insurance is to protect the company from
the loss of a key employee due to death or disability but
just as important to any business is retaining their key
people. Most small to medium size companies have key employees
that generate large percentages of revenue annually. Losing
one of these key contributors to a competitor can potentially
be devastating. Key man insurance can be purchased as a
benefit for the employee while at the same time providing
some security to the company essentially
tying the executive’s benefits to continued service.
Life insurance policies can be purchased on key employees
for the mutual benefit of the company and the employee. Some
plan options include executive benefit plans and nonqualified
deferred compensation arrangements. For more details on using
key man insurance to retain key executives see, “Executive
Compensation Strategies”.
Key Person
Insurance Advantages
Included below are just a few of the
many advantages of key person insurance:
| 1. |
Affordability. Both key
man life and disability insurances are inexpensive. In
fact, key man life can be funded with inexpensive term
insurance. |
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| 2. |
Key employee insurance policies are
easy to acquire and do not require any special filings
or IRS disclosures. |
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|
| 3. |
Peace of mind to business owners and
investors/creditors alike. |
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| 4. |
The business has the choice of which
employees to insure. |
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| 5. |
Proceeds of keyman life and disability
are generally received by the business tax free¹. |
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| 6. |
The business has the option of using
universal life insurance to fund key executive
compensation plans. These permanent policies build
cash value that may be used, if needed, by the business. |
Uses for Key
Man insurance
The primary uses for key man insurance include:
| 1. |
Providing funds for recruiting
and training a replacement key employee. |
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| 2. |
Paying any expenses or bills while
the company stabilizes. |
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| 3. |
Securing loans for business growth
and expansion. |
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| 4. |
Strengthening the company’s
credit position. |
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|
| 5. |
Purchasing stock from the deceased
owner’s estate. |
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|
| 6. |
Salary continuation arrangements to
surviving spouse. |
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|
| 7. |
Executive compensation planning. |
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|
| 8. |
Transitioning the company to successor
owners. |
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Insurance Quote Now!
¹ Life insurance death proceeds may
be subject to the corporate Alternative Minimum Tax (AMT).
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