Three types of Key-Person Insurance for your business

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If you are a business owner, you may have an individual critical to your success. Insurance can protect you against financial loss if incapacitated in three areas.

1) Key-Person Life Insurance
2) Key-Person Critical Illness Insurance
3) Key-Person Disability Income Protection

Key-Person Life Insurance Life insurance is usually the foundation of a key-person protection strategy. It provides an immediate injection of capital into the business precisely when needed—when a key person dies. At this time, the death benefit is paid to the company tax-free.

Renewable Term Life Insurance is usually the most economical option over the short term. In certain circumstances, permanent insurance may provide better protection when coverage is needed over a long time.

Key-Person Disability Income Protection Disability insurance can be used for two purposes in a key-person context:
• The provision of a continued salary to a key person that becomes disabled, usually until the earlier of age 65 or recovery from the disability.
• Owner-managers can purchase insurance that provides continued payment of office expenses and salaries during disability, usually for a limited period.

Key-Person Critical Illness Insurance Critical illness insurance provides protection when a key person is afflicted by a specified disease or health problem that does not necessarily render them disabled but affects their desire or ability to work. Depending on the policy, this insurance coverage can pay a lump sum, or an income payable to the business, to help cover losses created by the absence of or lower productivity of the individual.

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