Meet John Doe. He owns a growing custom software development company with 30 employees. Meet Maria Gonzalez – she is the company’s valuable sales and marketing manager along with responsibilities for managing all the staff. Business is good and Mr. Doe is pleased until Maria dies unexpectedly. The emotional and financial impact on the company is enormous.
This story can have two endings – one, where Mr. Doe has purchased key person life insurance on Maria’s life and one where Mr. Doe did not have key person insurance. If such a tragedy were to strike your business, which ending would you have?
Key person life insurance is insurance a business owner buys on the life of a person who is essential to the business. The employer is both the owner and beneficiary of the policy. Should the key person die, the employer will receive a tax-free lump sum payment to enable the business to cope with reduced profitability resulting from the key person’s absence.
How a Business Benefits from Key Person Life Insurance
A key person life insurance policy offers several benefits to a business:
- Reduces the financial impact of an untimely death such as having funds to find and train a replacement
- Keeps the business in operation and assures customers and creditors that ‘it’s business as usual’
- Helps heirs meet estate tax obligations without impacting the family business
So if you’re a business owner, consider the merits of key person life insurance – it may be more affordable than you think. Call Jacqui McFarlane and get your business covered.