Within any small company, there is usually at least one “key person” who is critical to its success. It could be a business founder, owner, partner or simply a valuable employee. It’s a person who can’t easily be replaced — someone the company would likely struggle to survive without.
That’s why there’s key person life insurance coverage. Key person coverage is life insurance, with the company being the beneficiary. In the event of the death of a covered employee, the company would receive a payout. The money can be used to help a company deal with the disruption caused by the loss of such an important employee and the cost of finding a replacement for that person. In the event that the deceased employee had an ownership stake in the company, the proceeds also could be used to buy out the deceased employee’s heirs in the event they wanted to cash out.
Should your business purchase key person coverage? We can help you determine whether this type of coverage makes sense for your business. In the meantime, here’s an informative primer on key person insurance and some of the questions you may want to ask yourself before purchasing the coverage.