Key Man Life Insurance

Protect Your Business after a Critical Loss

​

If something were to happen to you, would your business continue to grow, or would it come to a halt, leaving your employees without jobs and income? Many small businesses and closely held companies rely heavily on one or two individuals whose knowledge, leadership, or client relationships are essential to day-to-day operations. If the unexpected occurs, the absence of that key person could threaten the future of the entire business.

​

That’s where Key Person Life Insurance (also known as “Key Man” Insurance) comes in. This policy provides your company with financial stability and time to recover if a critical team member passes away, whether that’s you, a partner, or an indispensable employee. It helps cover lost income, recruitment and training costs for a replacement, or even debt obligations tied to that individual.

​

Here, we’ll help you identify those vital roles within your organization and design a life insurance policy that protects the business you've worked so hard to build. Our team will work with you to ensure your business remains strong, even in the face of a loss.

​

Criteria for Purchasing Key Man Life Insurance
 

Key man insurance plans are designed to protect businesses from the financial hardship that could result from the loss of a critical employee or business owner. With this policy, the company pays the premiums, and the business is named the beneficiary, receiving the payout in the event of the individual's death.

​

When deciding who should be covered under a key man insurance policy, consider these three essential factors:

​

1. Impact on Business Survival or Continuity

Key man insurance is intended for individuals whose death would significantly affect the viability and ongoing operations of the company. For example, as a small business owner, your unexpected death could jeopardize the future of your business. This policy helps ensure that the business can survive and continue while making adjustments during a difficult transition.

 

2. Difficulty in Replacing a Vital Employee

Some employees are exceptionally difficult to replace. Consider the top salesperson whose contributions generate significant revenue or the lead researcher who drives innovation. The proceeds from a key man insurance policy can provide the financial support needed to bridge the gap and stabilize the business during the time it takes to find a suitable replacement.

 

3. Securing Financing

A key man life insurance policy can be a useful tool when applying for loans or financing, such as an SBA or bank loan. Lenders may view the policy as a safeguard, ensuring the business can recover financially if a crucial individual passes away.

​

How Much Coverage Do You Need with a Key Man Life Insurance Policy?
 

Choosing the right amount of coverage for your business’s key man insurance policy can be a complex decision. Several factors should be considered, including:

​

• Cost of Replacing a Vital Team Member: How much would it cost to replace the employee or business owner? This includes recruitment, training, and lost productivity.

• Age of the Key Individual: The age of the person being covered can influence the cost of the policy and the amount of coverage needed.

• Nature of Your Business: Consider how reliant your company is on the skills or leadership of the key individual. In certain industries, losing a vital person could have a significant impact on operations.

• Net Worth of the Company: The financial health of the business and its dependence on the individual’s contributions will also guide how much coverage is appropriate.