What is Key Man Insurance?
What would happen if the owner or one of the key employees were lost? Who would lead and nurture those vital business relationships needed to maintain and the grow the business? Key man insurance can help you answer those questions with peace of mind.
Key Man Insurance is a type of business insurance used to protect an employer or a lender against the financial loss that could result from the premature death of the most essential employees of a company. The Key Man is the owner, an employee with a major ownership or decision making role, key sales person, an engineer, or anyone who is vital to the organizations existence and makes significant contributions to the company’s earnings.
The death of a key person can have a devastating effect on a business, especially if the employee controlled substantial accounts and profits, or had established relationships with external sources which are often irreplaceable.
How Key Man Insurance Works
Key man insurance works just like an individual life insurance policy – when the insured dies, the policy pays out a benefit to the beneficiary(s). With a key man policy, the business owns the policy on the key employee and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout. There are instances when a lender may require the borrower to purchase a key man policy to protect the loan. In this instance, the naming of the beneficiary is not as straight forward as detailed above. Contact Qwiklifeinsurance.com to configure your key man policy correctly.
Additionally, our agents will appraise the person you want to insure and determine the proper insurance premium. This step is critical since most quoting websites will produce a generic low ball quote to get your business. Our detailed quotes are based on the current health history of the employee, age, sex, height/weight, and tobacco use. Keep in mind, not everyone can be get insurance coverage – the insurer has the right to deny coverage. Qwiklifeinsurance works with over 300+ insurers and we’ll work to get you a key man insurance policy regardless of your health history.
To determine who needs key man , take a look at your business and think about who is irreplaceable. In many cases within a small business, the owner, the person that manages the employees, and handles key customers is the key person. If that person is no longer here, the business pretty much stops.
If you think you and your employees are invincible and key man is not for you, then you may be forced to reconsider. Oftentimes investors or lenders will insist you purchase a key man policy to protect their investment. Another reason to reconsider? POLICIES ARE VERY AFFORDABLE.
How Much Does It Cost?
In general, coverage ranges from matching the key person’s base salary to as high as 15 times his/her salary or it can be a flat amount. Most small businesses find they do best with a payout of five to ten times the key employees’s salary.
Determining the amount of key man needed is not difficult to determine, but you should spend a considerable amount time brainstorming why you are considering the insurance and the duration. Ultimately the goal should be to get the correct amount to achieve your company’s objectives.
Uses For Key Man Insurance:
- Key Man can be used to help find and train a new employee to replace the deceased.
- A Key Man can provide the funds to purchase ownership belonging to the deceased owner or key person.
- A Key Man policy can be used to fulfill any contractual agreement to continue to provide the employee’s salary to his or her family for a certain number of months.
- It can be used as collateral requirement to guarantee an SBA loan.
- Proceeds from the Key Man policy can be used to pay off debt.
- It can provide salary continuation or income to the surviving spouse.
Protect Your Business Today!
As a business owner, CFO, or Board Member, it is your responsibility to ensure the business risks are minimized. Purchasing Key Man Insurance is the most cost effective way to eliminate this unnecessary risk to your company. If you are convinced that key man insurance is right for you, then call the experts or simply request a free quote to figure out how much key man insurance your company really needs.
A personalized strategy for each of your business goals.
Key Man Insurance
This is for the business owner or key person whose existence is necessarily vital to the company. What will happen to your business if you are not here? Make sure to get key man insurance. Let us help you with sound professional advice.
Venture Capital
Since Venture Capital firms are typically investing in small to mid-size companies whose most valuable assets are the people themselves, protecting these assets is a way to protect their investment.
SBA Insurance
If you are applying for an SBA Loan, a Key Man Life Insurance policy may be required by the lender. Find out how and who accepts Collateral Assignments. We work with numerous lenders. Get expert advice.
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