Key Man Life Insurance
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If you’ve started a company from the ground up and are crucial to its survival, you need to start thinking about what would happen if you were no longer around to run it.
Who Needs Key Man Life Insurance?
Key man life insurance is an interesting form of protection. Back when individuals would spend their entire lives with one company, this type of life insurance would have been an essential component for a few members of the company. Which only makes sense: if you grow with your company and have been there since the beginning, your role in the company’s development is much more crucial than someone who was hired within the last month. These days, individuals are more comfortable with moving and changing careers and companies – it is unlikely that an individual will stay with a company for his or her whole life. But that doesn’t mean that key person life insurance should be obsolete. In fact, if you’re an entrepreneur or are the founder or owner of a small-to-medium-sized company, you will need this kind of life insurance to assure that your company continues to grow and thrive after you can no longer run it. If you’re the key person of your business, your health is tied directly to the health of the company.
Key person life insurance helps keep your business afloat in three ways:
Shopping for Key Man Policies
Before you begin shopping for a key man life insurance policy, it is important to sit down and assess your company’s financial future and to know which kind of policy you should get. For example: whole life insurance, or insurance that remains throughout your whole life and builds a cash value, may be a good choice for your personal life insurance, but should not be your go-to for key person life insurance.
Because key man life insurance is meant to assess the short-term needs of your company, you will be better off choosing a term life insurance policy. These types of policies are less expensive and provide adequate benefits to protect your company’s bottom line. You may want to look for a buy-sell agreement with key man life insurance included. These types of agreements are best for companies with more than one key person.
If you or your co-founder is unable to run the company, this type of policy will allow the company to transition smoothly to the healthy party, minimizing financial damages.