A key employee can be an owner, a top-producing salesperson, a manager or another person whose contributions are critical to the success and survival of your business.
When a key employee dies, it can create a crisis, along with numerous questions. Who’s the new “go-to” person? Will you suddenly be at a competitive disadvantage? Will you lose relationships with customers and vendors? Will your sales be negatively impacted?
Most small- and medium-sized businesses will need to find a replacement for key employees. The process to locate, hire and train a new employee takes time and money (including lost revenues).
This money could come from existing savings, a loan or life insurance proceeds. Life insurance on a key employee is a cost-effective way to protect your business against the employee's premature death.
How? The business owner can get written consent from the key employee to purchase a life insurance contract on him/her. The employer is the owner, beneficiary and premium payer of the life insurance. Upon the key employee's death, the business receives the death benefit. This is intended to help maintain the company’s stability during the time it takes to replace the key employee.
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Universal life insurance
Universal life insurance is a kind of permanent life insurance coverage that provides flexible protection and cash accumulation that you can adjust as your needs change.