Employee Key Life Insurance: What Your Company Needs To Know

Key person life insurance, also known as key employee life insurance, is a business life insurance policy taken out by a company to protect against financial loss if an owner, partner, top executive, or essential employee passes away. The business is the owner of the policy and pays the premiums, and the insurance proceeds (death benefit) go to the business if the key individual passes away. This type of insurance is reserved for employees whose absence would be a financial burden to the business and who would be difficult and costly to replace.

Who does key employee life insurance cover?

Key employee life insurance is a policy that a business takes out on its most valuable employee or employees. It is also known as key person insurance or key man insurance. The business is the owner of the policy and pays the premiums. The policy is designed to protect the business from financial loss if an owner, partner, top executive or essential employee passes away.

The policy provides funds to help ensure business continuity if a key employee dies. The death benefit is paid directly to the business, which can use the money to pay recruiting costs, overhead, or any other operating expenses. The policy can also include a rider for disability coverage to help if a key employee is disabled.

A key person is often the business owner but could also be someone who has a highly specialised role or is responsible for bringing in a large share of sales. These policies are generally reserved for employees whose absence will be a financial burden to the business and will be difficult and costly to replace.

Who owns the policy?

Key person life insurance is a business life insurance policy taken out by a company to help protect against financial loss if an owner, partner, top executive, or essential employee passes away. The business is always the owner of the policy and typically the beneficiary. This means the company pays the premiums (not the insured employee) and the insurance proceeds (death benefit) go to the business if the key individual passes away.

Key person insurance is a tool that business owners can use to help overcome the loss of an indispensable executive or employee. With this coverage in place, business owners will receive a lump-sum insurance payment that they can use to keep their operation running if an insured employee passes away. The death benefit will be paid directly to the business and can be used to pay recruiting costs, overhead, or any other operating expenses.

The business is typically the owner of the policy and pays the premiums. If the employee dies, an income tax-free death benefit is paid to the business, minus any loan amounts, to help the business get through a difficult time after the loss of a key employee.

Key person insurance is a form of company-owned life insurance, or COLI. When the insured dies, the business serves as the beneficiary and receives the death benefit.

Who pays the premiums?

Key person life insurance is a business life insurance policy taken out by a company to protect against financial loss if an owner, partner, top executive, or essential employee passes away. The business is the owner of the policy and pays the premiums. This means that the company pays the premiums, not the insured employee. The insurance proceeds (death benefit) go to the business if the key individual passes away.

Key person insurance is a tool that business owners can use to help overcome the loss of an indispensable executive or employee. The business will receive a lump-sum insurance payment that they can use to keep their operation running if an insured employee passes away. The death benefit will be paid directly to the business, where it can be used to pay recruiting costs, overhead, or any other operating expenses.

The policy provides funds that can help ensure business continuity if a key employee dies or becomes disabled. It is a form of company-owned life insurance, or COLI. When the insured dies or becomes disabled, the business serves as the beneficiary and receives the death (or disability) benefit.

The business typically pays the premiums for key person life insurance. This is because the business is the owner of the policy and the beneficiary of the insurance proceeds. The premiums are paid to the insurance company to keep the policy in force and provide coverage for the key employee.

Who receives the death benefit?

Key person life insurance is a business life insurance policy taken out by a company to protect against financial loss if an owner, partner, top executive, or essential employee passes away. The business is always the owner of the policy and the beneficiary, meaning the company pays the premiums and the death benefit is paid directly to the business. This can be used to pay recruiting costs, overhead, or any other operating expenses.

In the event of the death of a key employee, the business receives an income tax-free death benefit to help it through a difficult time. This can be used to pay for recruiting costs, overhead, or any other operating expenses. The death benefit can also help the business transition after the death of a key employee.

The death benefit is paid to the business, not the employee's family or beneficiaries. This is because the business is the owner of the policy and the beneficiary. The business pays the premiums, not the insured employee.

The death benefit is designed to help the business overcome the loss of an indispensable executive or employee. It can be used to keep the operation running and safeguard the business from financial loss.

What is the purpose of key employee life insurance?

Key person life insurance (sometimes called "key man" insurance) is a business life insurance policy taken out by a company to help protect against financial loss if an owner, partner, top executive, or essential employee passes away. It is a tool that business owners can use to help overcome the loss of an indispensable executive or employee.

With key person insurance, the business is typically the owner of the policy and pays the premiums. The business also serves as the beneficiary and receives the death benefit. This means that if the covered employee passes away, the business will receive a lump-sum insurance payment that can be used to keep the operation running. The death benefit can be used to pay recruiting costs, overhead, or any other operating expenses.

Key person insurance can also include a rider for disability coverage to help if a key employee is disabled. This type of policy provides funds that can help ensure business continuity if a key employee dies or becomes disabled. It is generally reserved for employees whose absence will be a financial burden to the business and will be difficult and costly to replace.

Overall, key person life insurance is a powerful way to protect your business from the potential loss of key employees. It can help safeguard a small business if an imperative employee dies or becomes disabled.

Frequently asked questions