Key Person Business Insurance

Protect Your Business with Key Person Insurance

Key Person Business Insurance

Key person insurance, formerly known as key man insurance, is a life insurance policy held by a business, which is used compensate a business from the financial losses that could arise in the event that a key member of your business dies or becomes incapacitated for an extended amount of time. The aim of the insurance policy is to compensate a business for losses and facilitate business continuity.
If death or disability strikes your business, key person insurance may the difference between your company’s demise or continued success.

Types of Business That Need Key Person Insurance

Any business who has an employee that is considered crucial to a business’s success should consider key person insurance. These types of businesses include;

  • Business Partnerships – in the event that one partner dies, the other partner may need to buy the partner’s share of the business from the family of the deceased partner.
  • Small to Medium Businesses – These are the most common business types that purchase key person insurance, due to the fact that the generally employ valuable key people to generate a large portion of the company’s yearly revenue.
  • Large Corporations – Big businesses can purchase key person insurance to cover their top executives or shareholders.

Key person insurance does not indemnify the actual losses incurred, instead it compensates with a fixed monetary sum that is specified in the insurance policy.

How Key Person Insurance Works

Any employer may take out a key person policy on any employee that is considered crucial to the company. Key person insurance is paid for by the business, and it is the business that is listed as the beneficiary on the insurance policy. If the key person dies, then the business is entitled to the insurance payoff.

Key Person Disability Insurance

Key person disability insurance is similar to key person life insurance, however, it covers expenses related to a person not being able to work due to a disability. Life insurance only pays out on the death of a key person, however, the disability of a key employee to work due to injury can be equally as devastating to a company. Having disability insurance on the key people in your business provides the financial means to stabilize a company during an adjustment period.

Key Person Insurance and Taxes

Key person insurance does not require an IRS filing. For the insured employee, there is no tax consequence for having key person insurance in Utah, nor is the policy included in the employee’s estate, unless the employee is also an owner. Death benefits are received income tax free and premium payments are non-deductible. *This tax information is provided for general informational use, and as such, should not be used as a substitute for a consultation with an accounting or tax professional.

Key Person Insurance Quotes

When death or disability strikes a key person in any sized company, it can lead to a loss of critical skills and/or income. The solution is protecting your business with a key person insurance policy. If your business would be dramatically impacted by the loss of one or more key business people, Key person insurance can effectively protect you and your business. In order to get more information about key person insurance or to get a quote, call or complete the form on page and start protecting what matters most.