The purpose of getting life insurance is to assure that those who are dependent on you will be financially secure in the event of your death. For many people, this type of dependency applies primarily to their families. But for others—such as business owners or important members of certain organizations—there are people beyond their family that need to be protected.
Key man life insurance is a type of life insurance that can protect the time, effort, and resources you have dedicated to your organization. Some people are so vital to an organization that their sudden absence could create immediate financial hazards for others. These people, known as ‘key’ people, can acquire life insurance that assures those beyond them will remain secure no matter what.
It is important to note that key man life insurance isn’t purchased by the key person themselves, rather, it is purchased by the organization that is dependent on their actions. This means that the monthly premiums associated with the policy will ultimately be paid by the organization instead of the individual.
There are a number of different reasons an organization might want to consider purchasing key man life insurance:
Though there is no type of life insurance that can replace someone who has passed away, a good life insurance policy will help you minimize the consequences of their passing.
When considering purchasing key man life insurance, the first thing your organization ought to do is think about which people will need to be covered.
Asking these important questions can help your organization better understand whether purchasing key man life insurance will be the right decision. Usually, the more impactful the loss of a given individual might be (from a business perspective), the more likely your organization will want to purchase key man life insurance.
Once you have decided who your business is going to cover, there are still several more important decisions you will need to make. You will need to determine the type of coverage, the extent of coverage, and the company that will provide the coverage for you.
As is the case with personal life insurance policies, key man life insurance policies come in two primary forms. Term life insurance is the most affordable and will provide your organization with coverage for a specific amount of time (usually 10 or 20 years). Permanent life insurance will provide coverage for the individual’s entire life and also accumulate a cash value over time.
Additionally, you can enhance your policy by also purchasing disability coverage. Disability coverage means that if your key person becomes unable to work—but doesn’t pass away—your organization will still remain financially secure.
The extent of the coverage you should purchase depends on how much your organization stands to lose in the event of the key person’s death. Naturally, if there is more that could be lost, you are going to want to purchase a larger policy. You may also be able to save money by bundling multiple key person life insurance policies together.
One of the most difficult components of purchasing life insurance is choosing between the many providers in existence. There are a lot of good companies out there to choose from, but it is still important to do your research and determine which one is actually best.
LifeQuote can help you learn about a wide variety of different insurance providers. Whether you are looking to purchase key man life insurance or any other type of policy, our easy-to-use calculator and makes it possible to compare your available choices by providing instant quotes within minutes. Speak to an experienced live agent now if you have any questions or concerns. He will be happy to assist you.