Protection on key employees of a corporation to prevent business disruptions
Key man life insurance is a policy maintained by the company on the life of an important employee. In the event of his/her death, funds will be available to partially offset the economic cost to the company of losing such an employee. In many cases, the continued success of the company may be stalled through the loss of the management capability of key personnel. Replacement is often difficult and costly in terms of both training and income requirements. In addition, continued creditor financing will be reviewed and possibly limited or retracted.
Life insurance may partially offset some of the financial problems that might arise in such a situation.
Benefits
- As a stabilizing factor to keep the business running
- To reassure creditors and keep credit channels open
- To finance the continuance of his/her salary as a death benefit to his family for a reasonable period of time.
