Key Man Life Insurance: Protect Your Company Against Tragic Loss of Life

A key man life insurance policy usually includes provisions for illness and disability.

Key man life insurance will help protect your company if the worst happens

An accident can strike any one at any time. If the victim is not killed, then quite often can be left severely injured, and unable to return to work.

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When this happens to a key player in your company, business could suffer irreparable damage. The death of the business owner himself can destroy a company.

But the loss of a person with irreplaceable talents and skills can cripple a business.

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Sudden Death of a Key Person: The Domino Effect

When a business owner dies or is left disabled, his family must deal with creditors. In many cases, the only way to do this is to sell assets or dissolve the company. The company may never recover from this loss.

Employees relying on the business for their livelihoods will suddenly be without a job, and no severance package to hold them over, until they are able to find other employment. The family of the business owner will have to use all funds available to satisfy creditors.

Customers will be left with unfulfilled orders, which can put their businesses in jeopardy. They may lose several of their customers and end up in bankruptcy themselves.

Businesses are very rarely all on their own. Every business relies on another business for various reasons. Everyone from the stationary supplier to the phone company will be affected if one business goes under.

But none as much as the company that relies solely on the products you produce to complete the products he sells.

A Dramatic Effect on the Company's Future

This can happen with the loss of a key player, as well. When a company loses a person with specialized talents and skills, the entire operation is put in jeopardy. Production halts, sales are lost and in no time the company is in serious financial trouble.

By the time a suitable replacement is found, the company can be completely desolate. The small cost of premiums for key man life insurance is well worth the cost of preventing the loss of your entire company, the livelihoods of all of your employees, and the businesses of your customers.

Who Owns the Key Man Insurance Policy?

The business owns the policy. The business buys the policy and pays the premiums, therefore the benefits are paid to the business to use for any purpose.

Since the main reason for securing key man life insurance is to protect the company, the company will usually use the funds to compensate for lost revenue, and to cover the costs involved in recruiting and training an adequate replacement.

In some cases, the survivors have no will to continue with the business after the tragic loss of a key man, especially the owner and founder of the company.

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In this case, the company may opt to use the insurance payoff to clear up debts, pay dividends to investors, distribute severance packages to employees, and to dissolve the company in a civilized manner.

With key man life insurance, a business has more options and flexibility. Bankruptcy does not have to be the only choice.

Key man life insurance will help protect your company if the worst happens

Who Needs Key Man Life Insurance?

In large corporations, the main handling of the company is usually the responsibility of several key executives, a board of directors, the chairman of the board and the Chief Executive Officer. The company usually has several top notch engineers and floor managers, as well.

Losing one of these people will not be fatal to the survival of the company. The others can hold the fort until a suitable replacement is found.

In small and medium-sized businesses, these positions are held by one or two people. Losing one of them spells disaster. Even losing a top salesperson can cause serious damage to the operation. Losing the chief engineer can cause all production to cease.

This means late orders, cancellations, and the loss of important customers. Creditors will begin to worry and might call in loans or outstanding invoices. Without having the funds available, the company will be forced into bankruptcy.

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Key man life insurance provides the funds to keep the company afloat during this transitional period. The payout provides the funds the company needs to meet creditor demands, and maybe find temporary solutions to production demands.

Your business is not usually the only business providing a certain product or service. With insurance benefits, you can outsource your work on a short-term basis to avoid losing customers.

Not Suitable For One-Man Companies

If you are a one-man outfit working from home or a rented office, you do not need key man life insurance.

In this case, all you need is adequate personal life insurance and disability insurance coverage, so that your family is not left with a pile of bills and undue hardship in the case of your death.

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