A Closer Look at Key Employee Life Insurance

Fiscal responsibility makes sense while trying to grow a company; however, a top-notch NJ life insurance is policy is also necessary for some and is a worthwhile investment to safeguard your company from potentially severe issues. Regardless of the size of your business, the unexpected can happen at any time. It is in your best interest to speak to an agent regarding the coverage you need. Businesses have the option to purchase Key Employee Life Insurance as a life insurance policy for a key executive’s life. The company is the beneficiary of the plan, and key employee life insurance is needed if the sudden loss of a key executive would create a significant negative impact on company operations.

Understanding Key Employee Life Insurance

The payout provided from an executive’s unexpected death essentially provides the company time to recruit a new hire and/or implement other strategies to save the business. This key person may be the owner, the founder, or key employee or two for small businesses. The aspect that qualifies them as a key employee is if this individual’s absence would result in the company going out of business. Therefore, key employee life insurance is well worth the investment. Key employee life insurance is especially important for those businesses that heavily rely on a founder or owner for functionality.

The Ins and Outs of Key Employee Life Insurance

The funds that the company receives can be used for expenses until a replacement person is found, debts are paid off, money is distributed to investors, severance is paid to employees, or the business is closed down properly. If a tragedy were to occur, this policy would offer the company some options other than immediate bankruptcy. To determine if a business could benefit from this coverage, the executives must consider who is irreplaceable in the short term. For a large majority of smaller companies, the owner is the one who does most of the critical operational tasks such as bookkeeping, managing employees and handling key customers, etc. If these roles came to a stop, the business would very soon not be able to function.

The amount of coverage needed greatly depends on each type of business and requires assessment by a professional. Consider asking for quotes on $100,000, $250,000, $500,000, $750,000 and $1 million policies.

Categories of Loss Covered by Key Employee Life Insurance

There are a variety of scenarios in which coverage can assist you in time of need that encompasses the following:

  • The losses related to an extended period when a key employee cannot work but has not died.
  • Coverage to protect profits, such as offsetting lost income from lost sales, losses due to delay or cancellation of business projects that a key person was involved in.
  • Coverage created to protect shareholders or partnership interests. Generally, this policy allows shareholders or partnership interests to be purchased through existing shareholders or partners.
  • Protection for those involved in guaranteeing business loans or banking facilities. The insurance coverage value is designed to equal the value of the guarantee.

About Provident Protection Plus

At Provident Protection Plus, we have served the businesses and residents of New Jersey, New York, and Pennsylvania for more than 65 years. We are a wholly-owned subsidiary of Provident Bank, the region’s premier banking institution, and we are prepared to offer you personal, business, employee benefits, and risk management solutions. To learn more about our coverage options, contact our specialists today at (888) 990-0526.