Key Person Life Insurance
Most businesses have partners or shareholders with different skill sets. Often that is why people become partners. A key person is one on which the business depends for its survival. It can be a technical person with a particular expertise or a sales person with special relationships with important clients. The death of such a key employee, whether or not they are actually a partner, can really hurt a business, sometimes forcing it out of business. Thankfully, key man life insurance can help prevent this.
What many businesses do to protect against such an eventuality is buy key person insurance on the key employee. The most common type of insurance used is term life insurance; however, universal life insurance or whole life insurance may also be used. The proceeds from a term life insurance policy or other type of life insurance policy can give the business time to move in a different direction or hire a new employee and bring them up to speed with important projects.
The loss of a key person can be devastating enough to a business, but the loss of the income produced by that person or the skills they contribute to the success of the business is offset at least partially by receiving the cash proceeds from the term life insurance, universal life insurance or whole life insurance when used as a key man insurance policy.
