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Happens to the employee. The key person policy can either be term insurance or permanent insurance. While the main purpose of Key Person Insurance is to provide a death benefit to the business in the event of the premature death of an essential employee, it can also be used as a way to provide the key person with supplemental non-qualified retirement benefits. Why Life Insurance? Life insurance is the one financial instrument that provides the necessary funds at precisely the time they are nee.

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Under a key person life insurance policy, the business owns the policy, pays the premiums and is the beneficiary. If a key person dies, the business then collects a death benefit. That money can be used to help a business replace lost revenue as they search for a replacement.

Key person life insurance (sometimes called "key man" insurance) is a business life insurance policy taken out by a company to help protect against financial loss if an owner, partner, top executive, or essential employee passes away.

Cost Examples by Coverage Amount Coverage Amount30-Year-Old Male50-Year-Old Female $250,000 $298 $934 $500,000 $354 $1,141 $750,000 $426 $1,524 $1 million $500 $2,0001 more row • Aug 21, 2024

Limitations of Key Man Insurance It does not cover the loss of a key person who decides to leave your company due to retirement or to take a job with another company. You are not able to purchase this type of insurance for employees who are not crucial to your business operations and ability to generate revenue.

In a small business, the key person is usually the owner, the founders, or perhaps a key employee or two. The main qualifying point is whether the person's absence would cause major financial harm to the company. If this is the case, key person insurance is definitely worth considering.

Essentially, if the death of this person would cause major financial harm to the business, key person insurance may be worth considering.

Insurance companies typically base the amount of key person insurance needed on a multiple of five to seven times the employee's current salary compensation and benefits. For example, using a multiple of five: $1,000,000 would be the amount of insurance needed for a key person with a salary package totaling $200,000.

The premiums for key man insurance are not tax-deductible. However, like other types of life insurance policies, the company receives the death benefit tax-free in most cases.

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© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232
Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
All Forms
Search all Forms
Industries
Forms in Spanish
Localized Forms
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232