Key Person Insurance

As a business owner, you may rely on a number of key people for the successful operation of your company. Many businesses have been built around the strengths and skills of a few individuals whose capital, energy, knowledge, or experience makes them a valuable asset to the organization.

Key person insurance can help preserve the value of your business and its continuation in the event of the death of a key stakeholder in the company. Replacing the expertise and knowledge of an essential individual can take time and money and can jeopardize the continuity of the business. A key person life insurance policy offers the following benefits:

  • Help heirs meet estate tax obligations without compromising or dissolving a family business
  • Keep the business running and assure creditors and customers that the company will operate as usual
  • Reduce the financial impact of the untimely death of a key individual by covering the expense of finding and training a suitable replacement

How Key Person Insurance works

The employer would be the owner and beneficiary of the policy. The key employee would be the life insured, but would receive no benefit from the existence of the policy. Under the "Income Tax Act" no deduction can be claimed by the employer for premiums paid under a key person policy. However, any death benefit proceeds would be received tax free by the employer and would provide the liquidity needed to hire and train new skilled individuals and provide cash flow through a period of sales decline.

Example: George Smith is the owner of a growing software company that employs 20 full-time workers. He relies heavily on Frank, his manager, to look after the day-to-day operations of the business while he is out dealing with clients and looking for new business. Frank dies suddenly of a massive heart attack. Obviously this has an emotional impact on the company but it also has a financial impact.

The "key person" life insurance policy that George has purchased on Frank's life provides the company with a tax free lump-sum payment, enabling him to overcome what might have been a deadly blow to his business. The insurance provides immediate cash to cope with reduced profitability, resulting from his manager's absence. There will also be funds available to pay an employment agency to find a replacement and reassure creditors that company is on solid footing.

Similar type programs can be set up to protect against a critical illness or the disability of a key employee.

 

Key Man Life Insurance


If an insured key employee or owner were to die, key person life insurance policy would provide a tax-free cash payment that your business could use as working capital; to recruit, hire and train a replacement; to pay off debts; and much more.

Key Features and Benefits:

  • A wide range of life insurance coverage amounts are available
  • We offer several term and permanent life insurance plans that are ideal for protecting your business against the loss of a key person
  • Life insurance premiums are not tax-deductible; however, the life insurance proceeds are tax-free. What's more, the cost of this invaluable insurance protection is low when compared to the value of your key person.

 

Key Person Disability Insurance

If an owner, co-owner or a key person became disabled, your business could be faced with the same financial situation as if the person had died-but no life insurance policy would pay out.

However, with a key person disability insurance policy you could use the monthly cash benefit as working capital; to recruit, hire and train a replacement; to pay off debts; and much more.

Business Overhead Expense Insurance

With business overhead expense insurance, you can be there for your business, even when you can't work.
If your business depends on your ability to generate income to help pay the bills, your absence due to a long- or short-term disability would impact the bottom line.

That's why we provide business overhead expense insurance. It's designed to help businesses with owners/partners who actively generate income (such as physicians, lawyers, accountants and engineers) pay ongoing fixed expenses-like salaries, rent, property taxes and utilities-in the event that a partner or owner becomes disabled and is unable to work.

Buy Sell Insurance

Using insurance to fund a buy sell agreement is a smart business decision.
To protect your business, loved ones and co-owners or partners, you can implement what is known as a buy sell agreement, which specifies what will happen to the interests of an owner, partner or shareholder who passes away or becomes disabled.

If your company's buy sell agreement requires that the other owners or partners purchase the deceased/disabled owner's interests, life or disability insurance-rather than personal funds or business assets- can be used to fund the buy sell agreement.

For many business owners, the simplest option is to purchase a life or disability insurance policy on each co-owner or partner. In this way, funds could be available to complete a buyout and provide the families of each partner or co-owner a secure source of funds for the value of their interest.

Alternatively, the business can purchase insurance on each co-owner or partner and use the insurance proceeds to purchase or redeem the deceased or disabled owner's interest in the business.

Find out more:


Buy Sell Life Insurance

Secure the funds your business would need to purchase the interests of a deceased partner, owner or shareholder.


Buy Sell Disability Insurance

Make sure your business has the funds available to purchase the interests of a partner or the shares of a shareholder who becomes permanently disabled and is unable to continue working.

 

Links

Here is a list of other insurances we do.  Please click on the links below to get more information.