Key man insurance, also referred to as key person insurance or key employee insurance, offers companies protection in the event of an untimely death or disability of a top salesperson, senior executive, or business owner. Just knowing that operations can continue running smoothly without major disruption brings peace of mind to business owners and shareholders alike. Should death or disability suddenly occur, key person insurance could be the difference between the company's downfall and its' enduring success.

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Key man insurance is more than simple life insurance. As one would expect, life insurance is a necessary element of a solid key man insurance plan, but key man disability insurance is of equal importance. While the risk of death is ever present, the risk of disability is much higher across all age groups. The best protection strategy for most companies is to secure both key man life and key man disability on all key employees and executives.

Does your business have adequate protection?

In most companies, particularly in ones that are small to medium size, success hinges upon a handful of individuals that possess highly specialized skills and experience. The loss of any one of these key employees to a death or disability can be detrimental to the future performance of the business.

The solution is to protect your business with key person insurance, which offers the financial means to stabilize a company during the adjustment period after the loss of a key employee or executive. Death or disability within the company is likely to mean loss of important management expertise as well as a significant decline in sales and productivity. Not only that, but hefty costs can be incurred during the process of identifying and training one or more people that have the talents to step into the place of the key employee. If your business could be dramatically affected by the loss of one or more top people, key man insurance will protect against this risk.

How will Key Man Insurance work for your company?

Businesses and their owners use life insurance and disability insurance to guard against the downfalls that often follow the death or disability of employees. In tandem with life and disability insurance, a company can purchase policies on the key employees to reserve the amount of funds needed to sufficiently replace their positions should they suddenly leave the workplace due to death or disability. The cost of securing key man insurance policies is usually quite small in relation to the benefit received when a key worker dies or becomes unable to work.

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As with disability insurance, the business secures the key man insurance policy on the life of the key person. It owns the policy, paying the premiums and acting as the beneficiary in the event the key employee dies or becomes disabled. While the premium payments made by the company are not tax deductible, the proceeds received are, in most circumstance, income tax free.

The company, not the key employee, is protected by key person insurance policies. Should a key employee die or become disabled, proceeds from the policy can be used by the company without restriction in regards to how funds are used. Most businesses find the funds received from a key man policy quite helpful in covering short term revenue deficits, as well as expenses associated with the search for adequate employee replacements.