A key person policy is a type of life insurance policy designed to protect a business against financial loss due to the death of a key employee. It is intended to cover the costs associated with replacing the employee and the expenses related to recruiting and training a new employee.
Specifically, a key person policy covers the following:
1.Replacement costs: Replacement costs associated with hiring and training a new employee to fill the role of a key person in a business. This includes additional labor costs, fees for recruitment services, and severance or other benefits paid to the new employee.
2.Lost revenue: In the absence of a key person, the business may experience a temporary or permanent loss of revenue. The key person policy will provide the business with a lump sum payment to help offset this loss.
3.Financial debt: In the event of a key person's death, the business may suffer financial loss due to loan financing, accounts receivable and other obligations that must be met in order to continue operations. The key person policy will provide coverage for these debts.
4.Taxes: If the key person's death leaves the business with a significant amount of income tax liability, the policy can provide coverage for this liability.
By providing financial protection against a key person's death, a key person policy can help businesses stay financially viable and ensure the continuity of their operations. For more information about key person policies, please visit https://www.cnpfolios.com/site/key-person-insurance-what-is-it-how-does-it-work/
