As we continue to navigate these unprecedented times as a nation, as communities, as families, and as business owners, we are learning the sacrifices and toll that this all can have on business owners across all industries and geographical locations. Every business is facing their own unique challenges as they figure out how best to protect their people, their customers, and the public while providing the same level of professionalism and maintaining the reputation that they have worked so hard to establish.

Important: Key Person Insurance is particularly beneficial for small-to-medium size businesses where the injury, inability to work, or loss of a key individual in the organization can affect the functionality of the company.

No matter the industry, sector, or type of business or situation that you find yourself in, one of the leading questions is: have we properly managed our risk to protect against unforeseen and uncertain challenges. One way to manage risk is to insure against the potential of loss; property insurance for property risk and liability insurance for liability risk. One of the most common overlooked and unprotected business assets is the key people in your organization. Those individuals who own or are co-owners of the business, those who make significant contributions to the success of the business, or whose absence would leave the business in a financial hardship or suffer another form of loss need to be considered. The question then becomes: what happens to the business if one of our key people can no longer come to work, or what happens to our key person if our business is temporarily closed or cash flow is restricted?

Help the company survive the loss of an Owner or significant employee

This is where key-person insurance comes in. Just as you insure other aspects of the business, you can insure against the loss of a key person. A properly designed insurance policy can help you protect the business from suffering financial losses due to the loss of a key person. And, the policy itself can provide a financial resource for you to use to provide support for your key person.

The business purchases the insurance policy on the life of the key person and pays the premiums, assigning the business as the beneficiary. The premiums paid are a non-deductible business expense and the accumulated cash value is considered an asset of the company. The death benefits are distributed as tax-free income. In the event of a qualifying critical, terminal or chronic illness or critical injury the business may access the value of the policy.

Key person protection for business continuity | Private Client Services by  Mercer
Protect Business Continuity

In addition, the business may access the accumulated cash value through policy loans and withdrawals to cover unanticipated expenses to ensure continued business operations. The accumulated cash value can also be accessed to help supplement earned wages or retirement benefits during the furlough of the key person or temporary closure of the business to ensure that the key person(s) were able to return to the business upon reopening.

Now more than ever we are learning that the key people positioned within our businesses are vital to our continued success and ability to serve our communities. Our key people will help promote a smooth transition and the rebuilding in a time of uncertainty and resilience.