FinishLine Insurance Services provides a list of services for Northern California’s local small business market. Are you a business owner who is looking to protect your business and family from unexpected future loss? Or would you like to invest in to a program that satisfies the protection and tax shelter you need? Business insurance comes in a variety of different forms and each one serves to satisfy a specific business model. The most common of these is called Key Man or Key Employee Life Insurance. Contact Finish Line Insurance Services to see whether Key Man Life Insurance is beneficial for your business. Get Started
Key Man Life Insurance – What is it for?
Key Man Life insurance is a protection plan designed to last the life of your business. All businesses need protection from the financial loss that may occur from the death of an owner, partner, or key employee. We structure this type of protection using life insurance products and we design the policy around the amount needed to offset the potential loss of that person. You see, life insurance will provide immediate tax free cash that can be used in a number of different areas the business would need to address. Most commonly businesses must deal with offsetting: Lost profits, hiring a qualified replacement, and protecting the company’s credit position. The business may also need funds to provide a hedge against the loss in business value. Our advice – Don’t get caught without this protection.
Here is how it works
Much like an individual life insurance policy, when the insured (key person) dies, the policy pays out a benefit. The business owns the policy and pays the premiums for the policy. They are the beneficiary, and in turn receive the benefit that is paid out at the time of death.
To put the policy in place, an insurance agent along with the business owner, appraise the person that is to be insured. The agent gives an estimate on the premium based on the age, health, and financial worth of the employee (based on salary and generated gross revenue). The key person will need to take a physical exam that is paid for by the insurance company. After the application has been processed and the exam results have been viewed, the insurance company will present their offer.
Did you know – Oftentimes investors will require that key employees have the insurance in force necessary to protect their investment in your company.
Who should be considered as a Key Person?
It is important to first say that the owner of the business should not immediately be assumed as the ‘key person” to the company. The rank of an employee is less important than the vital actions they carry out on a day to day basis.
Here are just five examples of employee positions that companies depend on to keep the business alive and profitable.
- Top Sales Performers
- Chief Technicians
- Primary Mechanics
- Project Managers
- International Representatives
Ranking this list of employees can be a very difficult process depending on the industry of the business. What we suggest is that you sit down with an experienced agent before making any decision or discussing this topic with the employees themselves. Our agents can give you a finer tuned look at what may be necessary for your business.
Key Man Insurance (Asset or Expense)
Key Man Life Insurance Policies are permanent insurance policies and therefore have a cash value account that is built into the program. These products can be used as assets to bring profit and protection not only to the business itself but also to the family of the employee. Many times when the key employee has retired the insurance plan has already paid for itself and is of no expense to the company at all.
However the business may choose to only purchase a term insurance plan that ends at the point of the key employee’s retirement. In this case the insurance purchased is certainly seen as an expense. We are willing to show you both programs side by side in order to clearly compare your options before applying for these policies.
At FinishLine Insurance Services we enjoy showing businesses how they can protect themselves and invest wisely through vital insurance policies. We also have a passion for showing you the benefits of accumulating wealth through these very same programs. Let’s start by talking about your business! Call us today.
