What is Key Man insurance?
Key man insurance is life insurance and/or disability insurance purchased by a business for one or more vital people to protect the company’s long term interests. The business pays for the insurance and is the beneficiary. If a key person dies or is disabled, the insurance proceeds are payable directly to the company and can be used for any purpose. A key person can be a business owner or an employee.
Key Person Defined
In short, a key person is anyone that is vital to an organization’s ongoing success. This can be a business owner or an employee. Many smaller companies depend on just a few people for revenue. The loss of one of these people could undermine a company’s viability. Examples include an inventor, top salesperson or corporate executive.
Does Your Company Need Key Man Insurance?
If your business would be significantly affected if one or more of your key people dies or is disabled, the answer is definitely YES! Companies of all sizes buy key man insurance but it’s especially important for smaller businesses that have considerable exposure if one valuable person is lost.
Key man insurance is also commonly purchased on business owners to efficiently plan for business succession. Key man life and disability insurance is a perfect tool for buying-out the interest of a deceased or disabled owner’s family. In the event of a death or disability, the company can redeem the outstanding shares of the business from his or her estate – effectively paying fair market value to the heirs while at the same time retaining current ownership.
How do You Buy Key Man Insurance?
Buying key man insurance is relatively easy and in most cases extremely affordable. The process is almost the same as purchasing individual life and/or disability insurance. A simple application for insurance on the life of the key person is completed and submitted to the insurance company. A routine insurance exam, which is paid for by the insurance company, is required along with some financial information on the business. The underwriting processtakes about 3-6 weeks and upon approval a policy is issued. Finally, the payment for the first premium is all that is required to make the coverage effective.
If your company relies on one or two key people for a large percentage of sales or revenue, the loss of one of these individuals could mean the end of your company. Key man life and disability insurance is an easy and affordable way to provide peace of mind to you and your business. The price for key man insurance is far less than the loss of your company due to lack of smart financial planning. For more information contact MEG Financial today at (877) 583-3955 or get an instant key man insurance quote now!