Are you a company that wants to know what key man insurance is? Well, this is basically a life insurance policy that a company buys for the company’s executive’s life. We all know that purchasing a life insurance or policy will all benefit us one way or another. It may be just for the sake of the ones that we are going to leave behind or for our business.
More often than not, this has been a practice of major companies for quite some time now. They do this to save their business in general in the event of a sudden demise of an executive. This is to avoid having such a big impact on them or the company’s operation in general. Whatever amount that the said company will get from the executive’s sudden demise, this will buy them enough time to find a replacement for the demised executive and thus will save their business.
The following are advantages that key man insurance gives a company/business:
- It allows the company to continue its operations even after sudden demise of an executive.
- This encourages its main employees to stay with the company.
- This also tends to attract new employees for executive positions.
- The policy is effective even if the insured employee is no longer with the said company upon his/her demise. But this is only applicable if the said company continues to pay for the premiums of insured executive/s.
- The money that the company will get from the insurance will be able to fund new hiring and other company expenses as well.
- Tax free via loans and withdrawals.
- Income tax free benefits for the dead.
- Tax deferred cash values.
Now let us talk about the options and cover variation that is now available to companies or businesses?
If you are considering on purchasing key man insurance for your business, the first that you must know is the different options or variations of policies that are now available.
The following are the three basic kinds of key man insurance, they are:
Whole Life – This is just like the UL or Universal Life insurance where whole life policies do build added cash value that also grows deferred tax. However, with this type of plan you end up paying high premiums while you are still young, hence when you reach older ages, the premium cost will offset increased premiums or coverage. This also happens to be the most expensive one amongst the 3.
Universal Life – This is indeed a variable option for most companies. As this combines low cost term insurance with tax deferred savings and is a bit the same as the whole life insurance. With flexible policy premiums, this is best for the ever changing business climates.
Term Life – Considered as the best one among the 3. This also happens to be the cheapest one. However, this life insurance is not made to answer long term needs.
So whether you want to prepare your company for unforeseen demise of one of your executives, or you just want to feel safe, the key man insurance will guarantee you that your business will remain in good hands.