Key Person Insurance
What is Key Person Insurance?
Key person insurance is a type of life insurance taken out by the business to compensate financial losses that would emerge from the death of an important person in the business. This key person is usually the owner, the founders, or possibly a key employee or two. Without these crucial people in your business, it could go under quickly. This is especially important for small companies because the unexpected death of the owner can cause the business to go under immediately. The purpose of key person insurance is to keep the company afloat while they search for another person to fill the lost position. It can also help assure progression of the business for employees, owners, and shareholders. Taking out a key person insurance policy on a key person can also strengthen the relationship between business partners. The payout can be used to find a replacement, pay off debt, distribute money to investors, pay severance to employees, and possibly shut the business down in a professional manner. The company is the beneficiary of the life insurance policy and pays the premiums.