Key person life insurance is typically required if your organization wants to obtain a loan or investment. The SBA and many banks often require key person life insurance as part of their lending criteria. since small organizations tend to be particularly dependent upon one or two people. Also, if your business is trying to raise money, investors can want assurance that the loss of certain employees wouldn’t cause the company to go bankrupt.
Aside from lenders’ requirements, organizations typically purchase key person life insurance as a form of financial protection. A key person policy is important if the loss of a particular employee would adversely impact your profits.
Key person insurance offers a financial cushion if the sudden loss of a certain individual would profoundly negatively affect the company’s operations. The death benefit essentially buys the company time to find a new person or to implement other strategies to save (or shut down) the business.
What should I look for in Key Person Life?
- Make sure you have enough coverage to easily make it through your tragic loss. It may take longer than you think or more than you think to recover
- Do you need a whole life policy? Maybe, but perhaps a cheaper term life will work better. Make sure to talk with an licensed and experienced agent to find out what fits your business needs.