Financially Underwriting Key Person Insurance

The amount of coverage available for key person insurance will be dependent upon the financial risk associated with the reason for buying the protection. Typical reasons for buying key person insurance include: key employee insurance, business loan indemnification, funding buy-sell agreements and executive benefits. In each of these cases, the financial justification requirements are different. The general guidelines for each are described below:

1. Key Person Insurance

  • Income including bonuses
  • Niche experience of the key person
  • Their contribution to earnings
  • Education and prior work history
  • Background of the company
  • Company revenues, income and net worth

2. Business Loan Indemnification

  • History of the business
  • Reason for the loan
  • Terms of the loan
  • Collateral
  • Company revenues, income and net worth

3. Funding Buy-Sell Agreements

  • Ownership percentages
  • Copies of the actual agreement
  • Company valuation
  • Company financial documentation

4. Executive Benefits

  • Key executives income including bonuses
  • Copy of the plan documents
  • How the benefits were determined
  • Company financial documentation

Regardless of how much insurance is applied for, whether life or disability, or requested by the business, an insurance company will approve a key man policy based on their interpretation of the true risk exposure. Providing the detailed financial information above allows the insurance company to accurately assess the facts and make the best insurance offer. Please contact MEG at (877) 583-3955 to discuss your special circumstances or additional questions on financial underwriting.