The context of key person insurance fundamentally deals with Business Insurance. It involves protecting the business from sudden loss of revenue should the life or health of the key person in the company is on the line. Making the business uncertain of its direction or possibly incur a major economic loss should the inevitable happens.
Advantages of key man insurance
- Enhances the ability of the business to continue operations. This is a big advantage on the company; so much so that the business is secured in any way should the inevitable happen to the key employees. As this can cushion the company from sudden blow on economic loss making it possible for the company to continue to exist.
- Encourages employees to stay on the job. This method of benefits will certainly motivate employees to work better and stay longer with the company. As it gives them security of tenure.
- Attracts new key employees. As key employee would benefit a lot from working with a company who offers insurance policy for life and health.
- Provides funds on expenses of hiring and training suitable replacement of key employee. The insurance proceeds can be used as operational expense to cover for this particular concern.
- It can provide credit lines for employees who would avail a loan during their tenure. This can also be considered as one of an employee benefit since a permanent life insurance policy has cash values that are available for loans at reasonable rates.
- Proceeds from the policy. The proceeds are income free, that are payable even if the key person is no longer connected with the business at the time of death. However, the business must still be in existence and should continue paying the premiums of the policy for this option to be possible.
- Cash surrender value option. This is another option that a business can undertake wherein the company can sell the insurance policy to the insured key person; moreover, the company at least will receive the return of premiums from the policy sold.
- Long term disability income insurance. In which case the policy can also provide funds to assure salary continuation to the permanently disabled key person.
The benefits of having key men insurance can absolutely go very far where employees would be motivated to work with businesses who value the importance of the people working for them. Click here for more information.