As a business owner, the loss of one of your most experienced and skilled employees as a result of disability or death could disrupt the management and productivity of your business and negatively affect your bottom line. In this situation, having suitable key person insurance can help your business avoid these financial stumbling blocks. In this article, we’ll take a look at key-person insurance as a way of safeguarding the financial growth of a business.
Key Person Insurance
A successful business typically reflects the presence of adept and valuable employees. These proficient workers contribute to the company’s progress. In the unfortunate event that a key person is lost, it may cause instability and heavy financial setbacks to the company. This is why many companies today purchase key person insurance on the life of a vital employee whose loss would ultimately have a negative impact on business.
Key person insurance protects the business in the event of the death or disability of valued employees. The policy will provide funds in either a lump sum or in monthly benefits, and can be used to do one or more of the following:
- Acquire, employ and train a replacement for the lost employee.
- Restore the company’s depleting profits in absence of the key person, such as through lost clients or customers.
- Repay the business’s debt or assure lenders of financial continuity.
The key person can be a managing director, computer programmer, an executive or even the owner of the company. The company is the sole owner of the policy and pays all the premiums for the policy. Thus, the company acts as the beneficiary upon death or disability of the key employee and receives the entire death benefit. It is important to note that the key employee is not the owner or the beneficiary in this policy, so his or her family does not receive any form of benefits. Premiums paid by the company are not tax deductible, but the death benefits are typically free from corporate income taxes.
We’ve got you covered. Call Loftis & Wetzel Corporation at (580) 363-3434 for more information on Oklahoma City business insurance.