The death of a key employee or shareholder most often would affect the profits, financial strength and stability of the company. Creditors, customers, employees and suppliers could lose confidence in the business at the death of a key person, especially, if the key person is the owner.
Key person life insurance is insurance, purchased by the business to deliver cash at death to provide solutions such as the loss of a key employee and for the funding of buy sell agreements between shareholders.
In Canada, when a company owns and is beneficiary of a life insurance policy, the death benefit is received tax free. The funds can then be used by the company for its purposes. The death benefit less the Net Cost of Pure Insurance (NCPI) can be paid out as a tax free dividend to surviving shareholders.
With careful planning, the key person protection can be designed to also provide executive benefits.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
The term Key employee or key man or business life insurance all deal with the same type of life insurance policy. It is a term or permanent life insurance policy owned and paid for by the company with the company named as the beneficiary. The sole purpose is to recover a financial loss incurred by the sudden death of this "key man or woman". The person is so important to the business success that a business could actually go under or have to restructure.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Let’s suppose you own a business. Obviously you can’t do everything yourself, so you need to hire people with special skills. Collectively you can get to where you want to go.
The people with special skills might include a high-ranking executive. Might also include a highly skilled technician. Perhaps a top salesman.
All these people play roles that are key to the operation.
And you, as the entrepreneur of the enterprise, are very much a key person too.
This is not to say that people who are not key do not bring value to the company and are not important. If all the business needed was key people, why would you hire anybody else?
But key people are the ones whose loss would create the biggest problems. Sales could go down. Vendors might not get paid. Clients might get nervous about orders being filled. Banks might think twice about lending money.
You need to protect your business against the loss of these people. If any or all of them disappeared tomorrow, you need to be sure that your business can go full speed ahead. Employees, clients, prospects, vendors, lenders, investors, and everyone else related to your business, need to be reassured that business will take place as usual.
And that takes money.
If you have the exact amount of money you need exactly when you need it, then you could tell people to not worry. Orders will get filled. Bills will get paid. You can take the time needed to find the right replacement.
And you don’t want to have to set up an investment program to cover these people. Nor do you want to have to borrow the money. You want this coverage to come as cheaply as possible without any hoops to jump through.
That is what life insurance does when it is purchased for key person coverage.
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Key person life insurance is insurance, purchased by the business to deliver cash at death to provide solutions such as the loss of a key employee and for the funding of buy sell agreements between shareholders.
In Canada, when a company owns and is beneficiary of a life insurance policy, the death benefit is received tax free. The funds can then be used by the company for its purposes. The death benefit less the Net Cost of Pure Insurance (NCPI) can be paid out as a tax free dividend to surviving shareholders.
With careful planning, the key person protection can be designed to also provide executive benefits.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
The people with special skills might include a high-ranking executive. Might also include a highly skilled technician. Perhaps a top salesman.
All these people play roles that are key to the operation.
And you, as the entrepreneur of the enterprise, are very much a key person too.
This is not to say that people who are not key do not bring value to the company and are not important. If all the business needed was key people, why would you hire anybody else?
But key people are the ones whose loss would create the biggest problems. Sales could go down. Vendors might not get paid. Clients might get nervous about orders being filled. Banks might think twice about lending money.
You need to protect your business against the loss of these people. If any or all of them disappeared tomorrow, you need to be sure that your business can go full speed ahead. Employees, clients, prospects, vendors, lenders, investors, and everyone else related to your business, need to be reassured that business will take place as usual.
And that takes money.
If you have the exact amount of money you need exactly when you need it, then you could tell people to not worry. Orders will get filled. Bills will get paid. You can take the time needed to find the right replacement.
And you don’t want to have to set up an investment program to cover these people. Nor do you want to have to borrow the money. You want this coverage to come as cheaply as possible without any hoops to jump through.
That is what life insurance does when it is purchased for key person coverage.