Key Man Life Insurance

Protect the continuity of your business.

Key man life insurance throughout Arizona.

Key man life insurance can keep your business afloat in the event of the death of any employee who is an integral asset to the company’s survival. We’ll work with you to design coverage that helps assure continuity of your business for employees, customers and creditors.

What is a Key Employee Life Insurance Policy?

You might describe the skills and knowledge of the senior staff as priceless, but if anything happened to them, the financial losses for your business could be very real.

Where ordinary life insurance compensates a person’s financial dependents for loss of income, key man life insurance is all about the costs a business faces when the person dies. It’s best suited for staff who are so vital to the company’s operations that it could struggle to survive without them.

How Does Key Man Life Insurance Work?

The payout from a key man life insurance policy will ideally help the company stay afloat while the other members of your staff come to grips with running the business, or until your business hires a suitable replacement and brings them up to speed.

In the worst-case scenario, the payout could instead be used to wind down operations in a controlled manner rather than face the chaos and damage of a forced liquidation.

In addition to paying out when a key staff member has passed away, some key man policies will also payout if the person is diagnosed with a terminal illness or suffers a critical illness that means they can no longer work.

Key man life insurance is a great way to protect your business. If you think this is a good fit for your business, let us know. We can walk you through your options.

Is Key Man Insurance the Same as Life Insurance?

When most people think of life insurance, they probably think of individual life insurance. This is an insurance policy that provides coverage to the relatives of the deceased. While key man insurance is a form of life insurance, it is different from individual life insurance because its coverage is meant to mitigate a business’s losses if a valuable employee passes away. 

Who Needs Key Person Insurance?

If you are trying to determine if your business needs a key man life insurance policy, consider the following questions: 

  • Is the company’s brand and reputation tied to a specific employee?
  • Is there an employee with unique skills who works on ongoing projects and directly drives the company’s success? 
  • Is there an employee who is the only reason your company is retaining certain business? 
  • Is there any employee who is connected with the company’s credit or business loans in such a way the employee is integral to the company’s financial state?  

If so, you might want to consider a key man life insurance policy. Additionally, some banks include key man life insurance as a part of their lending requirements. AZCAL Life Insurance will help you determine exactly what you need. 

Who is the Owner & Beneficiary of a Key Person Life Insurance Policy?

The business is the owner and beneficiary of the key person life insurance policy. The business will pay the insurance premiums and then if that key person passes away, the business will receive the insurance payout. This coverage will help the business survive while figuring out the next steps. 

Is Key Man Insurance Tax Deductible?

In most cases, key man life insurance premiums are not tax-deductible. However, if the “key man” employee passes away, then the insurance coverage paid to the business is typically free of income tax.  

How is Key Man Insurance Calculated?

Calculating key man life insurance policies will differ in every situation. However, you should consider the following points when determining how much key man life insurance to get: 

  • Loss of revenue during the time it would take to find and train a replacement
  • The key person’s income multiplied by the amount of time it might take to find a replacement 
  • The percentage of income the key man brings to the business multiplied by the amount of time it will take to hire a replacement 

If your business needs a key man insurance policy, don’t hesitate to contact our insurance experts. We will help you get the insurance policy you need. 

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As an independent agency, we offer multiple options at competitive prices. Contact us today!

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