Your Business Needs Key Man Life Insurance
A small number of important personnel or key men run most companies. These key personnel run the most important functions of a business and their loss can affect the bottom line. From the sales person who brought in important clients to the chief accountant who controls the finances of the business.
What Is Key Man Life Insurance?
Key man life insurance protects the company financially if these people were to pass on. The company pays the life policy premiums is the beneficiary of the policy. The payout from the death of the executive is meant to buy the company time to replace the executive and protect it from sudden financial loses during this period.
Small businesses and especially partnerships describe it as the business world’s term life insurance. Term insurance refers to life insurance that is taken for a certain period. In the business world, this term is usually during the term of the employee contract or until the executive is expected to retire.
The policy is only meant to cover the company if death of the executive occurs. In other situations such as the event of the company executive retiring, resigning or being fired, the company has the option to surrender the policy. In most of the policies, there is an added clause where the employee has the chance to change the policy to a personal term life insurance.
The major concern for most small business is figuring out the value of the policy. It is important to go through the company’s financial records to come up with the proper value. The most important question to ask is “what will be the company’s financial loss in the event of losing the employee?” In other words, what do you believe is the value of the employee to your business?
As with other insurance policies, it is important to get professional help to determine the proper value. It is not enough to guess the value of the loss of your business partner. It is also important to choose business term life insurance from companies that are reputable and have a good paying record.
It is not enough to get insurance for the physical assets in your business. Your employees are your most important assets and their loss can be devastating. It is imperative to prepare your business for eventualities such as death. This term life insurance for businesses is one of the best ways to protect your business.
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