- Group Benefits
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What is Key Person Insurance
Key Person Insurance is a life insurance policy that is purchased by a business on the life of an owner, executive, partner, or other employee who is considered indispensable to the company and would create a financial burden in the event of their death. With this type of Insurance, the company owns the policy and is the beneficiary. The company receives a lump sum payment in the event of the insured employee’s death. These types of policies are typically reserved for people who the company could not function without, we would not put key person insurance on every employee.
Purpose of Key Person Insurance
In the event of the death of a key person in a company, the insurance would pay a lump sum benefit and then that money can be used to cover the losses incurred while trying to fund a replacement for that Person. This means the money can be used for wages, recruitment, incentives, to offset lost income, or anything else the company deems necessary.
Just like when you are buying an insurance policy for yourself, it is important to have your advisor shop around for the best policy. We normally shop the market and show you what we believe are the three best options. These typically include the two cheapest policies, and a policy from a company with a great reputation for paying claims quickly. Price can vary depending on insurance amount, health of the insured person or people, and company you wish to place your policy with.