Key Man Insurance

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Key Man Insurance

A life insurance policy that a company purchases on one or more of its most important employees. The company pays the premiums and is the beneficiary. If the employee dies unexpectedly the company receives the benefit to offset the financial loss from the employee's demise. Partnerships often have key man insurance on each of the partners, while publicly-traded companies carry policies for major executives and managers. Companies use key man benefits to buy back stock in the company from the decedent's estate. It is also common to use the benefit to offset lost production or to pay a headhunter to find a replacement employee.
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References in periodicals archive ?
"Key person insurance is intended to help companies overcome those hurdles."
Seville, a principal and account executive at Parker, Smith & Feek Inc., has also noticed that more entities are buying key person insurance and even using insurance mechanisms to help fund their business continuity and transition plans.
One of my first tasks when I joined the firm was to design an entire small business financial plan for my uncle's business, including key person insurance, a fully funded buy-sell agreement, and a shareholder agreement.
Key Person insurance is woefully underutilised in the UK.
Key person insurance can cover the costs resulting from loss of revenue, loss of intellectual capital, downtime, and the training and recruitment fees associated with replacing that individual.
Key person insurance and an up-to-date and funded partnership agreement are just a couple of techniques to ensure business continuity after the loss or disability of an owner or key person.
The buy-sell strategy is a great technique to start with and may lead to other sales, such as key person insurance, executive compensation and personal planning for the business owners.
Key person insurance protects a business when a key person dies.
At the same time, the key person insurance policy was rewritten to enable both the nonprofit and the executive's family to be protected should he pass away.
The safety net provided by key person insurance (or, as it was called in the old days, "key man" insurance) can enhance the value of a business, in addition to providing peace of mind.
Key Person Insurance. An insurance policy on the life of a key employee whose death or disability could cause the employer financial loss.
Key person insurance is a simple yet effective insurance policy taken out by the company on the life of that person.