Is key man coverage worth the money?

How do you really know if you need this type of coverage and what does it do? A key man life insurance is exactly what the title says it is, it protects the life or lives of key employees that work for your organization. Key Man policies are not restricted by government guidelines so you get to determine who the business would like to insure.

This type of policy helps protect the companies owner and the other employees in case of the death of the highly valued employee or owner. Smart business people know how important a key man plan can be in the planning and logevity of what is most likely there largest single asset.

The business buys a term life insurance policy on the life of the key employee or possibly a cash value policy. premiums will come from the business and they will be the beneficiary of the death proceeds. Upon the death of the covered employee the company will receive the death benefit proceeds from the policy. The monies are typically used to offset any decreased revenue, pay bills, hire new and qualified replacements and to fund a benefit for the deceased's family.

How do you know if you need this type of policy or plan to help protect your business?

Ask yourself the following questions to help determine if this type of coverage makes sense for your organization and situation.

• Could your company withstand the loss of one or more of your key employees from a sudden death or accident?
• How hard or difficult would it be to replace the key people in your company or organization?
• How would your clients react to the death of the key employee, what if you lost your valued employee to your competition. would the customers that your key person handles follow him or her?

The probability of your company being affected by one of the above factors is very high if you look at statistics.

How does Key Person Insurance help you or the company when the policy is needed? This type of plan will give your business cash flow when it is needed, customers may leave for a competitor, your creditors will feel more at ease and you have money to hire a replacement.

What are the advantages of a Key Man Life Insurance policy? Business gets to select which employees are included in the plan. Life insurance proceeds are distributed income tax free to the business (typically). Creditors and clients can relax that the continuity of the business is intact. Key Man programs are easy to set up with very little reporting requirements with the IRS.