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.
New York Checklist — Key Employee Life Insurance is a comprehensive insurance policy specifically designed to protect businesses in New York from financial losses due to the death of a key employee. This type of insurance provides coverage for businesses by compensating them for the loss of a key employee, often someone who holds critical skills, knowledge, or expertise that is vital to the company's success. Key employee life insurance is essential for businesses in New York to mitigate the potential financial risks associated with the sudden loss of a key employee. The policy can provide financial stability and support to the business, especially during the transition period following the loss of a key employee. The different types of New York Checklist — Key Employee Life Insurance may include: 1. Key Person Term Life Insurance: This type of policy offers coverage for a specific period, usually ranging from 10 to 30 years. It provides a lump-sum benefit to the business in the event of the key employee's death during the policy term. 2. Key Person Permanent Life Insurance: This policy offers coverage for the entire life of the key employee. It provides a death benefit to the business that can be used to recruit and train a replacement or to manage the financial impact caused by the loss of the key employee. 3. Key Person Universal Life Insurance: This type of policy combines the features of term life and permanent life insurance. It offers flexible premium payment options and a permanent death benefit for the business. 4. Split Dollar Life Insurance: This arrangement involves the sharing of premium costs and benefits between the business and the key employee. It can serve as an incentive for the key employee to remain with the company while providing the business with insurance coverage. Key employee life insurance is crucial for businesses operating in New York as it helps mitigate financial risks, assists in recruiting and training replacements, and ensures the continuity of operations in the event of a key employee's death. By including this coverage in their business plans, companies in New York can protect themselves and their stakeholders from potential financial hardships.
