Key Man Insurance

What is Key Man Insurance?

Key Man Insurance is life insurance that your company obtains on a key executive. Your company is the beneficiary and pays the policy premiums. This type of life insurance is also known as "key person insurance," "key woman insurance" or "business life insurance."

Why Does Your Business Need Key Person Protection?
Small to medium-sized businesses in Orange County often rely on the specialized skills or relationships of a few high-level individuals. The sudden loss of a founder, lead developer, or top sales executive can lead to:

• Immediate Revenue Loss: Interruption of ongoing projects or loss of key accounts.
• Recruitment Costs: The high price of headhunting and training a suitable replacement.
• Loss of Credibility: Potential instability that worries creditors and investors.

How Key Man Insurance Works

The process is straightforward but requires expert calibration to ensure proper coverage:

1. The Policy: The company purchases a life insurance policy on the key employee.
2. The Premium: The business pays the premiums and owns the policy.
3. The Beneficiary: In the event of the employee's death, the business receives the tax-free death benefit to maintain operations.

Tax Implications and Benefits

Note: While premiums for Key Man Insurance are generally not tax-deductible, the death benefit is typically received by the corporation tax-free, providing the liquidity needed to keep the business afloat during a transition.

Signature America Wealth Management can help determine the best approach.

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