Benefits Of Business Life Andhealth Insurance (key Person Insurance)

Definition of "Benefits of business life andhealth insurance (key person insurance)"

Cory Whitman real estate agent

Written by

Cory Whitmanelite badge icon

A Plus Realty Georgia

Life insurance and long-term disability income insurance on major employees, with benefits payable to the business. Key person insurance has these advantages:

  1. enhances the ability of the business to continue operations;
  2. fosters smooth sale of a going business between an estate and a purchaser by providing funds to buy out the interest of a deceased key person;
  3. encourages key employees to stay on the job;
  4. attracts new key employees;
  5. provides funds for expenses of hiring and training of a replacement key employee;
  6. provides a line of credit (A permanent life insurance policy has cash values that are available for loans at advantageous rates.);
  7. policy proceeds, which are income free, are payable even if the key person is no longer in the employ of the business at the time of death; however, the business must continue to make the premium payments after the key person leaves the employment;
  8. a life insurance policy can be surrendered for its cash value or sold to the insured key person; thus, the business will usually at least receive the return of premiums;
  9. long-term disability income insurance on a key person also provides funds for salary continuation to the disabled key person. (For temporary disability, the business might prefer to self insure because the expense of premiums for this coverage is generally excessive when compared with the potential income benefits.)

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

New pension-accounting rule (Employers Accounting for Post retirement Benefits Other Than Pensions) which mandates that employers that provide post retirement benefits to include life ...

Membership organization of individuals especially trained in the application of property and casualty insurance to personal and business situations. Membership is achieved by passing a ...

Maximum dollar amount of coverage in force under a health insurance policy, a property damage policy, or a liability policy. This maximum can be on an occurrence basis, or for the life of ...

Insurance or annuity contract used in pension plans to purchase increments of retirement benefits through contributions for each employee paid into a fund. Benefits are guaranteed to ...

Remedy imposed by a court of law, usually in the form of a monetary award, as compensation to the insured party for the civil wrong incurred. A civil action is initiated by the injured ...

Appreciation in the unsold assets' value. When assets are sold, their capital gain (loss) is shown on the insurance company's income statement; any unrealized gain or loss is not included ...

Coverage for an advertiser's negligent acts and/or omissions in advertising (both oral and written) that may result in a civil suit for libel, slander, defamation of character, or copyright ...

Life insurance payment that is constant from year to year. The premium may be paid throughout the life of an insured or may be limited to a maximum number, such as 30 annual premiums. The ...

Application of conventional terms and conditions to the reinsurance of a risk. Contrast with non-traditional REINSURANCE. ...

Popular Insurance Questions