KEY PERSON INSURANCE

​​What is key person life and disability insurance?
Key person insurance is a form of coverage that financially protects an organization from the unexpected death or incapacity of a business owner or executive. Business owners and executives spend considerable time and effort acquiring the knowledge and experience necessary to generate revenues, forge partnerships build client bases and acquire the intellectual property resources that are vital to the continued success of the business.

What is the impact of losing a key person to your business?
The untimely death or permanent disability of a key person may affect your organization’s:

• Ability to acquire new business;
• Ability to deliver immediate mandates and projects;
• Operational costs, financing or other expenses;
• Shareholder value for publicly traded companies; and
• Confidence of shareholders, creditors, and employees in the organization's stability.

What does key person insurance provide?
It creates a tax-free and often immediate availability of capital so that, along with a viable succession plan, business owners can offset lost revenues and satisfy the expectations of clients and lenders until the transition to a replacement key person has been finalized.
 

Should your organization have key person insurance?
A key person could be:

• A founder or owner that is responsible for the majority of business development and responsible for long-term client loyalty and client relationships;
• An individual with unique intellectual capital and experience that is the driving factor for product development or attracting new clients;
• An individual with proven leadership abilities that results in a significant financial contribution to the organization;
• An individual is key to financial management or for negotiating preferential lending agreements on behalf of the company; or
• An individual who has invented a unique product or service that is not easily reproduced.

What is the risk to your business if a key person:

• Passed away?
• Became incapacitated or became unable to contribute to the organization’s continued financial profitability?
• Held stake in the organization as a Shareholder that was transferred to a beneficiary, which caused operational or financial difficulty for the organization?

To learn how to mitigate financial risks to your business and its key persons, please contact LMB Insurance today.