Most people associate life insurance with families. A working spouse, mother, father, or any important person that the family depends on for financial survival gets a life insurance policy to help loved ones after an unexpected death.
Can a Company Benefit from Key Person Life Insurance?
Absolutely. Insurance companies are willing to underwrite life insurance policies as long as there is an insurable interest in the insured party. And a thriving company has a keen financial interest in a founding partner or any important key business executive who brings in most or much of the business.
Key person insurance is geared for businesses who depend heavily on an individual for the continued success of the business. If the person should pass away, would there be a sudden loss of income? Will other personal business connections be severed? Will the business flounder without the expertise of the individual? All these can constitute an insurable interest. Proceeds from a key person life policy can help pay for a replacement after the death, provide a source of income until new business is attracted, and even help pay off an ownership share of the business to surviving relatives.
Points to Consider
New businesses that form with a few partners should be keenly aware of the need for key person life insurance. It’s important to consider what would happen if any one of the partners or owners were not around. Though it may seem morbid, planning for death contingency in a business is just good business.
If you are a key person in a company, or are part owner of a company who depends a great deal upon a certain individual, consider the possibility of a key person insurance policy. Talk to an agent and get a quote on a policy that will serve your business well in the event of unexpected death.
