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For many small and mid-sized businesses, there may be one or a couple of key employees that are crucial for the continued success of the business. This may be the founder, a vice president of business development, or perhaps even the top sales executive. What would happen if this key person were to die unexpectedly? Would it significantly impact your business?

Understanding Key Person Insurance

For many small businesses, the death of a key employee often means the death of the company overall. Key person insurance, also known as key employee insurance, is a life insurance policy purchased by a company to protect the business against the loss of an essential employee. The business purchases the life insurance policy, and in the event of the untimely death of the covered employee, the company receives the insurance benefit.

The purpose of this type of coverage is to help a company survive the death of the key employee, providing options other than immediate bankruptcy following the tragedy. The insurance benefit may cover expenses while the company looks for a replacement person, or it may be used to pay off employees and debts in order to close the business without bankruptcy.

How Do I Know If I Need Key Person Insurance?

Take a look at your business and ask yourself:

  • Are there any employees, including yourself, that are essential to the functioning of the business?
  • How would the loss of your key employee(s) affect the future of the company?
  • Would your business survive without that person, or would it be at a significant risk for bankruptcy?

Your BenefitSource insurance professional can provide guidance for determining whether your company needs key person insurance and understanding how much coverage would ease the burden following a tragedy. We will work with you to find the right coverage for the lowest cost possible. You can call us directly at (877) 215-5431 or email us for more information.

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