By Bret Harding
Key man life insurance is an affordable way to prevent your business from sinking after a critical employee passes away. Although contemplating the death of a key employee is a pretty dismal subject, the fact of the matter is it must be addressed soon than later. Key man life insurance plays an important role in any size business, but typically in a start-up company it becomes vital to the continued success of the business, should something ever happen to one of the key employee’s.
Key man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout.
To ensure the livelihood of the company, the money can be used to pay off debt and keep creditors at bay, find a replacement for the deceased, buy out the deceased's shares in the company (buy-sell agreement), or even help to supplement the income of the deceased's family.
The founder or owner of a business shouldn't immediately be considered the right or only candidates for a key man life insurance policy. Rank is less important than who the critical employees in your business are. Your business couldn't function day to day without the founder, but it also may not be able to survive without your revenue-generating sales team or without the precious relationships a business development employee has with your vendors.
If you still think you and your employees are invincible and key man life insurance isn't for you, you may be forced to reconsider. Oftentimes investors and lenders will insist you purchase a policy to protect their own investment. Another reason to consider? Term life insurance policies are dirt cheap!
How does it work? An insurance agent appraises the person you want to insure and sets a premium on that person. The premium is based on the current health of the employee, his (or her) health history, age, and salary. Keep in mind that not everyone can be covered - the insurance agent does have the right to deny coverage.
Structurally, many key life insurance polices are set up as permanent polices that build cash value over time. However, a smaller business can opt for a more affordable term life policy where premiums are paid until the employee retires or leaves the company, and then it can be transferred to that key person's replacement.
In general, coverage ranges from matching the key person's base salary to as high as 10 times his salary - or it can be a flat amount. Most small businesses find they do best with a payout of two to three times the key employees' salary, at a cost of less than $1,000 per year for the premium. A permanent policy will cost more, about 3percent the face value of the policy.
It's not fun to think about, but key man life insurance is an affordable way to ensure the future of the business that you and your employee’s have worked so hard to make successful.
To Learn More About Key Man Life Insurance For Your Company Call Or Email Bret Harding: 801-372-2647, email: Bret@UtahInsuranceSolutions.com. Visit: www.UtahInsuranceSolutions.com
Thursday, January 14, 2010
Could Life Insurance Save Your Business?
Could Life Insurance Save Your Business?
By Bret Harding
Key man life insurance is an affordable way to prevent your business from sinking after a critical employee passes away. Although contemplating the death of a key employee is a pretty dismal subject, the fact of the matter is it must be addressed soon than later. Key man life insurance plays an important role in any size business, but typically in a start-up company it becomes vital to the continued success of the business, should something ever happen to one of the key employee’s.
Key man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout.
To ensure the livelihood of the company, the money can be used to pay off debt and keep creditors at bay, find a replacement for the deceased, buy out the deceased's shares in the company (buy-sell agreement), or even help to supplement the income of the deceased's family.
The founder or owner of a business shouldn't immediately be considered the right or only candidates for a key man life insurance policy. Rank is less important than who the critical employees in your business are. Your business couldn't function day to day without the founder, but it also may not be able to survive without your revenue-generating sales team or without the precious relationships a business development employee has with your vendors.
If you still think you and your employees are invincible and key man life insurance isn't for you, you may be forced to reconsider. Oftentimes investors and lenders will insist you purchase a policy to protect their own investment. Another reason to consider? Term life insurance policies are dirt cheap!
How does it work? An insurance agent appraises the person you want to insure and sets a premium on that person. The premium is based on the current health of the employee, his (or her) health history, age, and salary. Keep in mind that not everyone can be covered - the insurance agent does have the right to deny coverage.
Structurally, many key life insurance polices are set up as permanent polices that build cash value over time. However, a smaller business can opt for a more affordable term life policy where premiums are paid until the employee retires or leaves the company, and then it can be transferred to that key person's replacement.
In general, coverage ranges from matching the key person's base salary to as high as 10 times his salary - or it can be a flat amount. Most small businesses find they do best with a payout of two to three times the key employees' salary, at a cost of less than $1,000 per year for the premium. A permanent policy will cost more, about 3 percent the face value of the policy.
It's not fun to think about, but key man life insurance is an affordable way to ensure the future of the business that you and your employee’s have worked so hard to make successful.
Learn More About Key Man Life Insurance Policies Visit:http://www.utahinsurancesolutions.com/utah_key_man_life_insurance
By Bret Harding
Key man life insurance is an affordable way to prevent your business from sinking after a critical employee passes away. Although contemplating the death of a key employee is a pretty dismal subject, the fact of the matter is it must be addressed soon than later. Key man life insurance plays an important role in any size business, but typically in a start-up company it becomes vital to the continued success of the business, should something ever happen to one of the key employee’s.
Key man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout.
To ensure the livelihood of the company, the money can be used to pay off debt and keep creditors at bay, find a replacement for the deceased, buy out the deceased's shares in the company (buy-sell agreement), or even help to supplement the income of the deceased's family.
The founder or owner of a business shouldn't immediately be considered the right or only candidates for a key man life insurance policy. Rank is less important than who the critical employees in your business are. Your business couldn't function day to day without the founder, but it also may not be able to survive without your revenue-generating sales team or without the precious relationships a business development employee has with your vendors.
If you still think you and your employees are invincible and key man life insurance isn't for you, you may be forced to reconsider. Oftentimes investors and lenders will insist you purchase a policy to protect their own investment. Another reason to consider? Term life insurance policies are dirt cheap!
How does it work? An insurance agent appraises the person you want to insure and sets a premium on that person. The premium is based on the current health of the employee, his (or her) health history, age, and salary. Keep in mind that not everyone can be covered - the insurance agent does have the right to deny coverage.
Structurally, many key life insurance polices are set up as permanent polices that build cash value over time. However, a smaller business can opt for a more affordable term life policy where premiums are paid until the employee retires or leaves the company, and then it can be transferred to that key person's replacement.
In general, coverage ranges from matching the key person's base salary to as high as 10 times his salary - or it can be a flat amount. Most small businesses find they do best with a payout of two to three times the key employees' salary, at a cost of less than $1,000 per year for the premium. A permanent policy will cost more, about 3 percent the face value of the policy.
It's not fun to think about, but key man life insurance is an affordable way to ensure the future of the business that you and your employee’s have worked so hard to make successful.
Learn More About Key Man Life Insurance Policies Visit:http://www.utahinsurancesolutions.com/utah_key_man_life_insurance
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