Key-person insurance benefits are often used to buy out the insured person's shares or interest in the company. Buy-sell agreements, which require the deceased executive's estate to sell its stock to the remaining shareholders, legally facilitate this process. Proceeds from key-person insurance can also be used to recruit replacement management.
The following form contains some critical questions you should ask your agent or broker when considering this type of insurance.
Michigan Checklist — Key Employee Life Insurance is a comprehensive policy designed to protect businesses in Michigan against the financial risks associated with the loss of a key employee. This insurance provides coverage in the event of the death or disability of a crucial employee who holds a vital position within the organization. Key Employee Life Insurance is essential for small, medium, and large businesses alike, as it helps mitigate potential financial hardships caused by the sudden loss or incapacity of a key team member. The policy offers a lump sum benefit to the employer, helping them navigate the challenges of finding a replacement, covering recruitment costs, and compensating for lost expertise, indispensable skills, or critical relationships. This type of insurance plays a significant role in maintaining business continuity, ensuring operational stability during tumultuous times. By undertaking this preventive measure, businesses in Michigan can safeguard their long-term success and minimize disruptions caused by unforeseen circumstances. Some key features of Michigan Checklist — Key Employee Life Insurance include: 1. Coverage options: This insurance policy provides flexible coverage options, allowing businesses to customize their policies according to their specific needs and budget. Various coverage levels are available to suit different business sizes and employee positions. 2. Death benefit: In the unfortunate event of the death of a key employee, the policy pays out a lump sum benefit to the company. This benefit helps cover expenses associated with finding and training a replacement, compensating for lost revenues, fulfilling contractual obligations, and maintaining business continuity. 3. Disability coverage: Certain policies also include disability coverage, offering financial protection in the event that a key employee becomes disabled and can no longer fulfill their duties. This feature ensures the company can sustain normal operations and meet financial obligations during the employee's absence. 4. Premiums and tax benefits: The premiums for Key Employee Life Insurance in Michigan may be tax-deductible as a business expense, subject to certain conditions. This benefit can provide additional financial relief for employers investing in safeguarding their businesses. Types of Michigan Checklist — Key Employee Life Insurance: 1. Standard Key Employee Life Insurance: This is the basic type of policy that provides coverage in case of the death or disability of a key employee. It ensures the business receives the necessary financial support to handle the challenges and costs associated with the absence of a crucial team member. 2. Key Employee Life Insurance with Critical Illness Rider: Some insurance providers offer the option to add a critical illness rider to the policy. This enhancement ensures coverage for specific critical illnesses, such as cancer, heart attack, or stroke, in addition to the standard death and disability benefits. 3. Key Employee Life Insurance with Business Overhead Expense Coverage: This type of policy includes coverage for business overhead expenses. In the event of a key employee's absence, the policy covers ongoing business expenses, such as rent, utilities, salaries of non-key employees, and other essential operational costs. Michigan Checklist — Key Employee Life Insurance is a vital investment for businesses seeking to protect themselves from potential financial hardships resulting from the loss or incapacity of a key team member. By carefully considering the available coverage options and working with reputable insurance providers in Michigan, businesses can ensure the long-term stability and success of their operations.
