Basic Benefits of Key Person Insurance
- Key man insurance is meant to help companies insure important employees without whom the enterprise may suffer. This type of insurance plan pays $500,000 – $10 million towards one compensation payment if the policy holder is ill, injured, disabled, leaves his job or passes away. The compensation payment given by the insurer can be used by the enterprise for a variety of things. For instance, this payment can be used to source new employees and train new employees who are going to be replacing the policy holder.
- Key man insurance can be purchased for either 1 employee or many employees. Usually, large companies may opt for many policies to protect principal shareholders and important employees that have an impact on the business; while small companies may opt for only 1 -2 policies to protect partners, owners or a few of the important employees that have an impact on the business.
- While key man insurance is a type of life insurance product, this is a type of business insurance plan. This means that, the company that takes out the policy in the name of the employee will benefit when a claim is filed since the company will be the beneficiary. This also means that, the family of the policy holder will not enjoy any additional benefits such as a compensation payment from the insurer. however; companies that want to protect important employees can opt for separate group insurance plans for these employees. These personal life insurance plans purchased for a small group of employees, will provide a lump sum or monthly compensation payment in a range of situations.
Advanced Benefits of Key Person Insurance
- Other possible uses of the compensation funds include settling bills, debts, making payments to clients, increase the company’s credit rating and securing new funds or loans. In addition, this amount can be used to purchase shares from the family of the policy holder if in case the policy holder has passed away.
How Key Person Insurance Can Help Your Company
- Key man insurance can help your company in many ways. This type of insurance plan can help your company stay operational even when you lose the backing of important employees. This type of insurance plan can prevent your company from being forced to file for bankruptcy. This type of insurance cover can ensure that you get financial protection when you need it the most.
- Key man insurance can ensure that you do not have to let go of other employees when the policy holder or policy holders are no longer with the company. This type of insurance plan can also ensure that you have enough money to pay employees severance packages if you decide to close down your business due to any reason.
5 Important Things To Note about Key Person Insurance
- Key person insurance can offer your company business security. This type of plan can ensure that you don’t have to worry about unforseen situations that involve important employees and that you are at peace of mind knowing that your insurer has you covered.
- Depending on the type of key man insurance plan you purchase and depending on the type of claim you file, you may be offered premiums that are affordable and tax deductible. Usually, funds given for a revenue purpose are tax deductible since the amount given is tax assessable. Some revenue purposes include, compensating for lost profit and replacing lost income due to the absence of the policy holder.
- While key person policies are a type of business insurance product, this type of insurance plan does not provide a compensation payment in case of liability claims or damage claims. This means that, if the company wants to protect itself from being sued for any type of liability then a public liability plan will have to be purchased. This also means that, if the company wants to protect itself from any physical damage, then a different type of business insurance plan will have to be purchased. Key person plans only protect the company when the policy holders are no longer with the company and when a successful claim is filed.
- Key man policies can help your company improve its credit rating and get funds for projects or for other business purposes. It should be noted that the credit rating of your company can be improved by paying off debts, bills and loans by using the compensation amount given by the insurer. a good credit rating can also ensure that you get loans for business purposes at a competitive rate.
- Key person plans can be purchased by following a few simple steps. If you are pressed for time and want to protect your company, partnership or small business, then all you have to do is find an insurance website that offers both multiple quotes and comparison services. Such websites offer free quotes from many insurers through the click of a button. These websites also allow buyers to choose which policies they want to compare and then provide various details of the policy for the buyer to compare. After choosing a website and opting for the quotes and comparison services, the buyer can either purchase a policy online or he can call the insurer up on the helpline number to purchase the selected policy. Purchasing a policy online is both easy and safe since insurance comparison websites use a secure payment system that is easy to use. The final step to protecting your company is to wait for the insurer to contact you after you have purchased the policy. The insurer you have selected will contact you within a few days, provide you with a legal document to help you understand the terms of the policy and once you agree to these terms the policy will come into effect. It should be noted that some insurers may have a mandatory waiting period for key person covers and this waiting period can range from 30 days – 120 days or more.