Executive Coverage
Key Person Insurance
This type of insurance is designed to protect a business in the event of the loss of a person who makes a significant contribution towards the profitability, stability and progress of the business.
Often times, an owner, partner, shareholder, or executive brings a specific expertise to the company. The death or disability of those persons could result in some business interruption in some fashion:
- Possible loss of customers
- Lead time for replacement to be effective
- Possible loss of production while training a replacement
- Additional cost of hiring a replacement
- Loss of credit rating
- Loss of credibility
- Current loans may be called up
- Loss of goodwill
The objective of key person insurance is to financially protect the company from adverse impacts if one of those key employees suddenly dies or becomes disabled.
How Key Person Insurance works
The business purchases a life insurance policy on the life of the Key Person, and is the owner and the beneficiary of the policy. The business pays the entire premium and will receive the entire death benefit. The Key Person does not have any interest in the policy, nor does his/her family receive any benefit from it upon death.
Buy-Sell Agreements and Funding
If you are involved in a partnership, you should plan for the event of your partner’s death and/or disability. Should you, or your partner become permanently disabled to the point where you are no longer work at the business on a regular basis, a Buy-Sell Disability Policy could be designed to provide the funding for the disabled partner to be bought out.
Group Disability and Critical Illness
A number of insurance carriers offer Group Disability and Critical Illness Plans to companies of at least 2 people. These plans are designed to offer the same comprehensive coverage as an individual plan, with group discounts ranging from 5 to 15%.