What Is Key Person Insurance?

Could your company bear the loss of a key executive or key employee? Who will lead your company when the CEO retires? What if your top salesperson or partner becomes permanently disabled? Do you have a plan? Having key person insurance policy can help you answer these questions with confidence.

MEG Financial, Inc. specializes in helping companies of all sizes protect their essential business assets with key man insurance. Don’t let the lack of a simple plan become a critical mistake to your business’ profitability and longevity.

The loss of a top manager or key executive due to a disabling injury or death would have devastating effects on most companies. Key man insurance allows businesses to plan for these unforeseen events and be prepared should disability or death strike.

What is Key Man Insurance, or Key Person Insurance?

Key man insurance, a.k.a. key person insurance or key employee insurance, is coverage that will protect the company or business in the case of an untimely death or disability of a top salesperson, executive or business owner. Key man insurance provides peace of mind to business owners and shareholders alike knowing that the business can continue operations without major disruption in the event of the loss of a key employee.

Defining A Key Person

Key employees are those people who are critical to the success and profitability of the business. These individuals may be business owners, partners or executives that have a direct impact on company earnings or whose skills, talents and expertise are crucial to the continued growth of the organization.

Some examples of key employees are as follows:

  • Individuals with creative skills or technical knowledge that cannot easily be replaced. These key employees may be software developers, inventors, scientists or anyone with a niche talent that cannot easily be replaced.
  • Top sales professionals that have extensive experience and continually exceed sales goals or have great relationships with vendors and high end customers.
  • Executives that are responsible for managing the daily operations of the company or are responsible for a special project or development program.
  • Someone whose death or disability would negatively impact the businesses credit or financial solvency.
  • Business partners that need to be protected in the event of death or disability. At the death or disability of one of these business owners, the family members share in the company must be purchased.

Key employees are individuals who have such an influence on the ongoing success of a business where their premature death or disability could result in the eventual demise of the company.

Understanding The Different Types

Businesses desiring to minimize risk and prevent the potentially devastating effects of the death or disability of a top employee or executive should own key man insurance. Other reasons businesses should consider key person insurance include succession planning for business owners as well as benefit planning for key employees.

Key man life insurance is a benefit paid upon the death of a key person or employee, where as a key man disability policy will pay to replace the value provided by the key person in the event of long term injury or incapacity.

Who Needs A Key Man Life Insurance Policy?

Key person insurance is needed by a wide range of companies and for many reasons but generally is most important for small and medium size businesses.

These companies depend on the expertise and talents of a small number of individuals for their success. The death or disability of one of these key employees or executives may well result in the demise of the firm. Depending on your business, you may need one or more of the major categories of key person insurance.

Business owners and corporations buy key man insurance to protect their company from the potential issues which may arise from the death or disability of a key person. Building a successful business takes many years and considerable effort and to lose years of hard work and substantial investment for failing to plan is not a sound business practice.

How Much Will You Need?

In many cases it is hard to put an exact monetary value on how important a key person is to a given business. Most of the requests we receive are based on the amount of funds being borrowed by the company via loan or some other arbitrary amount that was determined by an investor. This may not be the best way to determine your need for key employee insurance. There is no cookie cutter way to do it, and we’ll help you customize your plan to make sure you don’t under or overpay.

Protect Your Key Employees Today

As a business owner, chief financial officer or board member, you have a responsibility to your company to make sure business risk is minimized. Key employee insurance is a cost effective way to eliminate the unnecessary business risk associated with the disability or death of a critical contributor to your organization. But what if a key employee decides to leave your company to start their own business or even worse takes a position with a major competitor?

Whether your business is a start-up firm needing key person insurance to secure financing or an established company requiring business succession planning, MEG Financial provides the business life insurance and disability insurance expertise required to assure your company gets a superior solution at the absolute best value.

A well structured key man insurance policy could be the difference between a company which continues operations uninterrupted, and one who is forced to liquidate and close its doors.

Is your company prepared?

Testimonials

"Michael Gray, Jr. of MEG Financial assisted our firm in procuring policies for our key employees. He was knowledgeable about the market, thorough, persistent and utterly professional in dealing with our challenging underwriting issues. We are completely satisfied with the results of MEG Financial."

Sue Lamb, Administrator
Owens & Turner, P.C. Alaska

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