Who Needs It?

Key man insurance is meant to cover a company's losses in the event of the death or disability of a key employee. That employee may be a particularly capable sales person, a manager, or the company owner – the underlying assumption is that the company will suffer greatly should that person pass away.

What Is It?

Key man insurance is generally a term life policy, with the length term being the time until that employee retires. The company pays the premiums on the policy and receives the death benefits if the employee unexpectedly dies. If the employee retires, the company may choose to also surrender the insurance contract, giving the employee the chance to convert the policy to a permanent one.

How Much to Cover for?

Losing a key employee can harm your business in multiple ways. Your key man insurance policy must provide enough coverage to account for all costs associated with such a loss. This loss is expressed not just in immediate loss of profits or revenue; the company must also bear the costs of hiring temporary replacement staff, of conducting the search for a suitable replacement, and the new employee's training.

It is vital for your company's financial health that you select the best insurance policy for your specific case. The above description is meant as a brief outline only, and does not reflect the full complexity of selecting the best insurance policy.

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