At MEG Financial, our objective is to help you secure the optimum policy at the absolute best value. Part of our commitment includes providing the critical information needed to obtain the best results. Each stage in the process of applying for key person life or disability insurance is described below.
Key Takeaways of The Process of Applying for Key Man Insurance
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Applying for key person insurance involves a simple but detailed process, including interviews, applications, a medical exam, underwriting, approval, and final policy delivery.
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A key person insurance policy protects businesses financially if a critical employee dies or becomes disabled, helping cover lost income, business debts, and hiring costs.
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Companies can choose between term life insurance, permanent life insurance, or universal life insurance depending on their financial goals and needs.
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Working with an insurance professional and tax advisor ensures proper coverage amounts, legal compliance, and potential tax advantages for premiums paid.
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Early planning is crucial for small businesses and sole proprietors who rely heavily on top executives and key employees to maintain financial viability after an untimely death.
The Complete Process of Applying For Key Man Insurance Policies
1. Brief Interview
Once the insurance company that will offer the top key man policy is identified, a brief telephone interview is required. During this interview, we will obtain your answers to the questions on the formal insurance application. (Your Total Time: 10-15 minutes)
2. The Application
Once completed, we will email, fax or mail you the key man insurance application for your review and signatures. Carefully review the entire application for accuracy, sign it and return to MEG Financial. If you would like to bind coverage, you must include a check payable to the insurance company for the first premium payment. Coverage will not be effective until a premium payment is remitted. (Your Total Time: 10 minutes)
3. The Exam
All insurance companies require a “mini physical” exam to obtain a key man policy. The insurance exam is completed by a licensed examiner who will contact you to setup an appointment at your convenience. The exam can be completed at your home or office. The exam consists of a blood and urine sample, height, weight, blood pressure check, and a detailed review of your medical history. On some occasions, an EKG may be required depending on the insurance company. For best results see “Exam Tips” in your application packet. (Your Total Time: 20-30 minutes)
4. Underwriting
The underwriting process begins when your key person life application and exam have been received by the insurance company. During this process, a representative at the insurance company will review your application and exam paperwork, order your lab results from the lab and request any medical records from your attending physicians.
They may also request financial information on the business as well as your driving record and a brief telephone interview to verify the accuracy of your information. The underwriting process should be expected to take 4-5 weeks depending on the specific requirements needed. Our office will work diligently to expedite the approval of your policy and we will keep you informed with a weekly status. See, “Keyman Insurance Underwriting Guide“. (Your Total Time: 20 minutes)
5. Approval
When your key man policy is approved we will notify you immediately. In some cases, information obtained during underwriting may result in an approval at a slightly higher rate. If your policy is approved other than applied, our office will immediately shop the marketplace to verify the accuracy of that offer.
If there are more favorable opportunities to secure a more competitive policy, we may transition to that insurance company. In any case, you are under no obligation to accept a policy that is not competitive. At MEG Financial, we leave no stone unturned in securing the best results for our clients. (Your Total Time: 5 minutes)
6. Policy Issue
Once your key man life or disability insurance policy is approved we will receive the policy within 7-10 days and will forward it to you the same day. Instructions for the policy requirements are included on a cover page sent with your policy. (Your Total Time: 5 minutes)
7. Delivery Requirements
When you receive your actual policy, carefully review all documents and call MEG Financial with questions. If you have no questions, review the cover page for the instructions and requirements needed to make your coverage effective. Simply return the initial premium due and any completed and signed forms required in the postage paid envelope.
Your key man policy becomes effective when you complete the requirements needed and submit your initial check made payable to the insurance company. Congratulations! (Your Total Time: 10 minutes)
(Your Total Time Investment: 90 minutes)
If you have any questions about applying for key man insurance, need additional resources, please call our office at (877) 583-3955.
Frequently Asked Questions about The Process of Applying for Key Man Insurance
What is the Key Man Insurance?
Key man insurance is a life or disability insurance policy taken out by a business on an essential employee. In many cases, a business owner must consider the key person’s salary, the monetary value they bring, and the potential major financial harm caused by a key employee’s death. Businesses can also explore cash value options that permanent life insurance policies offer, allowing them to build reserves.
When the business owns the policy, the company pays the premiums paid, and the policy’s death benefit can be used to cover a business loan, satisfy a financial institution, or protect against business debt and lost sales. Unlike other life insurance policies, a key person policy focuses on maintaining the financial viability of the company if a key employee dies. Whether the solution involves term life insurance, universal life insurance, or a permanent life policy, choosing the right insurance coverage is essential.
How to Get Keyman Insurance?
To get key man insurance, a company must first identify its critical employees, then apply for coverage through an insurance provider. The process usually involves underwriting, including medical exams and financial assessments.
Is Key Man Insurance Worth It?
Key man insurance is often worth it for businesses that rely heavily on a few individuals for revenue, strategy, or operational success, as it can cover financial losses and provide stability during a transition.
How Do I Choose a Key Person Insurance Provider?
Choosing a key person insurance provider involves comparing financial strength ratings, reviewing customer service records, evaluating policy options, and working with a knowledgeable insurance broker to find the right fit for the company’s needs.
Conclusion and Summary of The Process of Applying for Key Man Insurance
Applying for a key person insurance policy helps secure your company’s future by protecting against the financial risks tied to a critical team member. A life insurance policy for a key employee not only preserves operations but also safeguards the company’s financial foundation. Key person life insurance provides a death benefit that can help replace lost income, manage company debts, and cover costs associated with hiring a replacement employee.
Working with an experienced insurance professional and consulting a tax advisor ensures that your plan complies with tax laws and secures your financial interests. They can help assess how much coverage is needed and whether the policy should include disability coverage or options like policy loans or collateral assignment to meet specific financial needs.
A properly structured business life insurance plan can provide tax advantages, provide legal clarity, and serve as a financial cushion that helps the company recover and continue operations after losing a top executive. Keep in mind that higher premiums may apply to older or less healthy employees, so early planning is key. Whether securing claims through strong claims paying ability or navigating accounting advice on tax deductible business expense strategies, protecting a key employee today ensures business continuity tomorrow.
