What Is Key Person Insurance?
This type of policy can help small businesses survive the death or disability of their owner or a core employee.
It can be thought of as a type of life insurance policy, but there is an important difference. With a traditional life insurance policy, your family members are the beneficiaries and will receive a payout upon your death. In key person insurance, however, it’s the business that is the policy’s owner and beneficiary, while the insured is the owner, executive or other individual who your business relies on to function.
What Does Key Person Insurance Cover?
Our key person insurance policies provide your business with money to transition from the loss of a key person. It can be used for:
- Covering your business’s operating expenses until a replacement can be found
- Training the individual hired to replace your key person
- Offsetting any lost income
It is also possible to add a buy-sell agreement to the policy that will allow you to purchase a former owner’s ownership interest in your company.
Should you decide that closing the company is the best way forward after the departure of a key employee, this insurance can be used for:
- Distributing money to investors
- Paying employees severance
- Paying off debts
- Other actions related to closing down the business.
The proceeds of this type of policy will be tax-free provided you have obtained the consent of the key person before getting the policy.
Types Of Key Person Insurance
Key person insurance does not have a one-size-fits-all approach — since each organization is unique, there are unique types of coverage based on needs and budget. Here’s a look at some of the types of key person insurance we offer:
Term Life Key Person Insurance
This is the most common type of key person insurance. It provides coverage if the insured person passes away at any point during the policy’s term. It can be obtained for a period of as much as 35 years and renewed when it expires.
Variable Life Key Person Insurance
This insurance stays in effect as long as you continue to pay its premiums. The premiums are placed in an investment account, which means the policy’s value could go up or down depending on the market.
Whole Life Key Person Insurance
Another type of insurance that stays in effect for as long as you’re paying the premiums, this policy puts the premiums into a savings account that gains cash value that can be borrowed against or withdrawn.
Disability Key Person Insurance
A disability component on your key person insurance means the insurer will pay a benefit should the insured key person experience a disability that stops them from carrying out their job responsibilities temporarily. It provides short-term benefits until the business can get everything in order.
Get In Touch With Burton & Company
Losing a key person can be devastating to your business, but key person insurance from Burton & Company can help you get back on your feet. Do not wait for your organization to suffer unexpected loss — it is important to acquire this policy as soon as possible. Give us a call at (888) 652-1325 or request a quote online to discuss your options today.