A “key person” is someone that keeps a business afloat. In the case of a small business, the owner is most likely the key person. Key persons could also be CEOs, CFOs, or anyone with many responsibilities that shape a company’s culture, financial state, and has excellent leadership skills. As you’re reading this, you can probably think of a person that would cause work not to be the same if they were absent, or maybe the company wouldn’t function at all. While it’s not the happiest or most positive thing to think about, it makes sense to question what would happen if something unfortunate happened to the people that keep a business functional. Today we’re going to talk about the ins and outs of key person life insurance.
Why Businesses Need Key Person Life Insurance
If you lose a significant team member, this is devastating, for apparent reasons. Then, you have to think about the financial ramifications. Things can become extreme. Without a key person, all companies risk folding or going into a direction that forever changes a company (and not for the better). Key-person life insurance helps a company stay financially protected in the wake of an injury, accident, or death. Being able to move forward and recover in the wake of such an unfortunate event is crucial.
What Does This Type of Insurance Cover?
- Hiring or training a replacement
- Helps to make up for the loss of profits or incurred debt
- Shareholdings and partner interests
- It can be used to claim a deduction on business taxes under the category “business expenses.”
Even if you decide to shut your doors, you can use this type of insurance to take care of:
- closing costs
- investor payoffs
- severance pay for employees
The Main Takeaway
Insurance is the umbrella that protects business owners and employees for a rainy day. In the case of a small business, key life person insurance is necessary when you think about the fact that small companies tend to have so few employees, depending on the industry. With the proper policies in place, a small business can stay around for generations. If you want to learn more about the type of plans your business needs, reach out to us.
Partner with Malden Solutions Today
Malden Solutions has a wealth of expertise in providing employer insurance solutions, HR solutions, and individual insurance solutions to businesses both big and small. Our team of seasoned professionals can help you navigate the rapidly-changing world of insurance with ease. We partner with businesses and individuals throughout the country to provide our dedicated services for employee benefits but also work within our surrounding communities in Maryland, Northern Virginia, and Washington, D.C. Contact us today to learn more about how we can provide effective, dynamic solutions for your business. Stay connected with us on Twitter, Facebook, and Linkedin.