Most companies have at least one employee who is key to the success of the business. Whether it's the owner, a partner, a majority stockholder or someone with a high level of expertise - such as a manager, scientist or salesperson - the loss of that person could have a negative impact on the operations of the business.
A key person strategy can help protect your company's solvency in the event of the untimely death of a key employee or owner by providing life insurance proceeds to cover business debts and maintain daily operations. Your business profits are dependent on the talent, experience, ability, initiative and business connections of your key employee.
We can help you protect your business from the loss of a key employee with key person life insurance, which provides many benefits:
Provides immediate funds after the death of a key employee that are not subject to corporate income tax1
Provides economic protection to help your business continue after the loss
Policy cash values are an asset on your balance sheet
Policy cash values and any dividends can be accessed2
We can help you initiate a key person strategy where your business purchases a life insurance policy on the key employee(s), who must agree to the purchase of the policy. Your business is the owner and beneficiary of the policy, so upon the death of an insured key employee, the company receives death benefit proceeds that can be used for many purposes, including:
Paying operating expenses
Satisfying business creditors or investors
Offsetting the costs of locating, hiring and training a replacement
Paying benefits to surviving family members
When the key person retires, the insurance policy can be transferred to him or her as a retirement benefit,3 or used for other business needs.
When considering a key person strategy, it is important to:
Estimate the value of your key employee to your business based on crucial projects, sales generated, costs to replace him/her and valuable business contacts
Have a business continuation strategy in place that outlines how your business will maintain operations if a financial or management disaster occurs
Consider your amount of debt and determine if it is covered by insurance mandated by your financial institution or if you would need funds from the key person insurance to repay it
A key person strategy can give your company options that might not otherwise be available to help continue your business after the loss of a key employee. Contact me to get started today.
1 Key person strategy life insurance death proceeds may be subject to AMT for a C-corporation.
2 The life insurance policy cash values may be subject to surrender charges, and the death benefit will be reduced by any loans or withdrawals.
3 This option may result in income-tax consequences to the employee.
IMPORTANT: The information and material contained on this Web site is not an offer to sell or a solicitation to buy any security or any insurance product in any jurisdiction. No security or other insurance product is offered or will be sold in any jurisdiction in which such offer or solicitation purchase or sale would be unlawful under the securities, insurance or other laws of such jurisdiction. Not all products are available in all states. Exclusions, limitations and reductions may apply. This Web site briefly highlights Farm Bureau's insurance policies and their benefits. The contract is contained only in the policy. Farm Bureau products are offered by Farm Bureau agents -- for more information about any Farm Bureau product, please contact me.