KEY PERSON PROTECTION
A key person can be anyone directly associated with a business or organization whose loss can cause financial strain. For example, the person could be a director of the company, a partner, a key sales person, key manager, or someone with specific skills or knowledge which is especially valuable to the company. This can also include clergy with the impact their loss would have on a church.
It is imperative that the organization be protected in case that person cannot perform his/her duties. The insurance companies with which we work, provide Key Person Plans that can cover Death in addition to many Terminal, Critical and Chronic illnesses. These Living Benefits policies can provide thousands of dollars in a lump sum or monthly payout depending on the circumstances.
As an example, if a Key Person Plan provides a $300,000 death benefit, the business would receive $300,000 upon the person’s death. Also, under this plan with Living Benefits, the business could collect 2% per month ($15,000) in many cases of critical illness.
An employer may take out a key person insurance policy on the life of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The aim is to compensate the business for losses incurred with the loss of a key income generator and facilitate business continuity. Other areas in which this type of plan can be useful include: Offset the costs of recruiting a successor, hiring temporary help, loss of business revenue due to the loss of the person's expertise, hiring a similar employee until the key person returns to work, etc.... Key Person plans do not cover the actual losses incurred but compensates with a fixed monetary sum as specified on the plan.
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