Churches that are borrowing funds for building projects should strongly consider key man insurance for pastors and even their board members. In many cases, banks require a key man life insurance as a condition for any loan. Consequently, churches that have a key man policy may have an advantage with prospective lenders.
This is a real life key man insurance case that we worked at MEG Financial. The names of the Pastor and Church have been changed to protect their identities.
We routinely receive inquiries and requests on our website for key man insurance for Pastors, Ministers and Church Leaders throughout the country. In most cases, the Church is undertaking a building or expansion project and is borrowing money to finance the deal. The lender that is making the loan, normally requires the Church to secure a life insurance policy to protect the loan.
Recently, we received such a request from Pastor Reynolds in California. His church, Grace Methodist Church, was expanding and purchasing a summer camp facility for their youth program and were borrowing $3,300,0,000 to fund the deal. The lender, as part of the package, required that $2,000,000 of key man life insurance be purchased by Grace Methodist on the life of Pastor Reynolds.
Pastor Reynolds, age 50, was in excellent health and came to us looking to purchase a life insurance policy for $2,000,000. We reviewed his options and determined that since the loan was for 20 years that he should consider a 20-year level term policy.
We quickly identified the insurance company that was going to offer the most competitive rate and proceeded to apply for the key man policy. On the application, we named Grace Methodist Church the policy owner and beneficiary and premium payor. Pastor Reynolds completed the application and required insurance exam and the case was submitted to the insurance company for approval.
In a few short weeks, the policy was approved as applied. We were able to secure a 20-year level key man insurance policy for $2,000,000 on the life of Pastor Reynolds that allowed Grace Methodist to finalize the $3,300,000 loan and purchase the summer camp and initiate the expansion project.
If your church is obtaining a loan for a building project or expansion, key man insurance for pastors is a great way to provide collateral assurance to a bank or lender. The cost is usually inexpensive and it is relatively easy to implement.