Key man life insurance is a coverage that insures the key man in a business. Key men are people that are considered essential in the functioning of businesses. Their absence may cause deterioration of the company. They are usually the owner, the founders or possibly an employee who possesses skills, knowledge, contacts, and/or relationships which are vital to the company. These key employees are very expensive and/or hard to replace. Key man life insurance works by having the company as the beneficiary. If the key man dies, insurers will pay benefits to the company. The main purpose of this is to maintain the company’s survival despite the loss of the person who made the business work.

Any business that requires employment of individuals that are significant to the continuance of the company is a good applicant for a key man life plan. Many companies might not be able to overcome the loss of a key man or woman. Not only does this occur in small-to-medium-sized businesses, but also with large companies. It may be quite costly to find and train someone as replacement. This plan offers companies time and money to overcome any financial difficulties while replacing a key employee.

There are also a number of financiers that use the key man plan. They may be cautious about lending money to small business operators, especially when one or two employees are considered significant in its proper functioning. There is a possibility that the contract includes a provision to purchase such plan. It depends on the contract whether the small company or financiers purchase the plan and remunerate its premiums. In this case, the financier will be paid the benefits. This guarantees that the financiers receive the money they have lent as soon as the key employee dies.

The Key man life insurance plan has two types: the term-life plan or the permanent-life plan. With term-life policies, pure insurance is provided without increase in money. Generally, it is the more affordable choice. On the other hand, permanent-life policies have cash value. A business has the advantage of being supplied with cash readily if they are in need of it. Naturally if businesses borrow against these policies, the amount of benefits they receive can be decreased. To determine which of the two policies to purchase, a company should determine if its costs matches up with the benefits it provides. Certain factors like general health condition and even age can have an impact on the policy; thus, affecting the choice of life insurance.

The key man policy should always be considered as part of an overall business plan. The business’ total revenue should be measured. The amount of revenue contributed by the key employee should be established. It is also vital to estimate how much the business, as well as the key employee’s contribution, is expected to develop in the future. Ensure that the coverage availed is sufficient so as not to buy additional plans, which can be quite costly. There is also significance in assessing how much revenue the key employee has contributed.

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Are you looking for more information regarding life insurance ? Visit http://www.termlifeinsurance.com/ today!

Author Bio: Are you looking for more information regarding life insurance ? Visit http://www.termlifeinsurance.com/ today!

Category: Finances
Keywords: life insurance,man life,key man life,man life insurance,life insurance plan,key employee