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Key Person Life

 Your Protection Matters

Key person life insurance, also known as key man insurance, is a type of life insurance policy that a business takes out on the life of a key employee. The purpose of this insurance is to help the company financially if the key person unexpectedly dies. 

  1. Purpose:

    • Financial Protection: Provides a death benefit to the company to help cover the financial losses that may occur due to the death or incapacitation of a key individual.

    • Business Continuity: Helps ensure the business can continue operations without significant disruption.

    • Debt Repayment: Can be used to pay off business debts, maintain cash flow, and cover costs associated with hiring and training a replacement.

  2. Who is Covered:

    • Key employees whose skills, knowledge, or leadership are crucial to the business's success, such as owners, executives, or employees with unique technical expertise or substantial client relationships.

  3. How it Works:

    • Policyholder: The business is the policyholder and pays the premiums.

    • Insured: The key person is the insured individual.

    • Beneficiary: The business is the beneficiary and receives the death benefit if the key person dies.

  4. Benefits:

    • Financial Stability: Provides a lump sum that can be used to stabilize the company’s finances, allowing time to find and train a replacement.

    • Creditworthiness: May improve the company’s creditworthiness since lenders and investors may view the business as more secure with this protection in place.

    • Employee and Stakeholder Assurance: Demonstrates to employees, clients, and stakeholders that the company has a plan for unexpected events, which can help maintain confidence in the business’s stability.

  5. Types of Policies:

    • Term Life Insurance: Provides coverage for a specific period, such as 10, 20, or 30 years. It is typically less expensive and is suitable if the key person’s contribution is expected to be critical for a limited time.

    • Permanent Life Insurance: Provides coverage for the key person’s entire life. It is more expensive but can be used if the key person’s contribution is expected to be critical for an indefinite period.

  6. Policy Details:

    • Coverage Amount: Determined based on the key person’s role, the financial impact of their loss, and the cost to replace them.

    • Premiums: Paid by the business, and the cost can vary based on the key person’s age, health, and the amount of coverage.

 

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The Toon Family is here to help. Ready to speak with us?

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Tulsa

(918) 986-9777

Edmond

(572) 910-7100

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