Key Man Life Insurance

If your business relies on one or two key players, key man life insurance might be an important part of your future. Whether that key player is you, one of your star sales persons, or an office manager, you owe it to your shareholders to insure the ‘key man’. This way the company won’t end in bankruptcy if the unthinkable happens.

What Is Key Man Life Insurance

Key Man Life Insurance is a life insurance policy written to help a company when its survival rests on one or two people. The company pays the premiums and is the beneficiary if the person dies.

Small companies often purchase key man life insurance when the owner’s relationships with clients and vendors are what keep the company working. But it’s not always the owner who is insured. Sometimes an owner retires and leaves the company in the able hands of someone else…and that person becomes the ‘key man’.

Key man life insurance policies sometimes cover a main salesperson. In small companies, clients often get used to dealing with one person and refuse to do business with anyone else. And sometimes a company relies on an employee’s personal relationships for clients or discounts from vendors. In case of a sudden death, key life insurance would give the company a cushion to fall back on.

What Happens to the Benefits in a Key Man Life Insurance Policy

The money is generally either used to keep the company afloat while finding a replacement, or to make it easier to liquidate the company, pay off debts, and split the proceeds between shareholders (often the owner’s family).

Owners insure themselves because several of their employees are dependant on the company…even though the company wouldn’t exist without the owner. The key man life insurance policy would guarantee the employees a salary while they searched for another job.

Do Companies Really Need Key Man Life Insurance

In a small company, there’s often a ‘one for all, all for one’ mentality. For some, the lack of office politics makes it a more enjoyable atmosphere…and perhaps a more reliable one. People feel like they’re less likely to undergo the mass layoffs commonly associated with large corporations.

Small companies are also more likely to hire people with certain situations that intrude on their work lives. A single mother might have to take off work if a child is sick or if school is canceled due to bad weather. Someone with chronic health problems may have to call in sick often. Small businesses often offer the flexibility to deal with such problems when large corporations do not.

For the reasons above, small business workers are often more dedicated to their employers. It’s not uncommon to find cradle to grave employees, who never consider switching jobs…so they’re completely dependent on the company. And if the company is dependant on one person, not having key man life insurance on that person is an injustice to the company on a whole.

Remember, you’re not the only one who relies on your business. Key man life insurance is the protection you need for your company, your employees, and your family.

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