Often businesses can be made or broken off of the hard work of one person. That person may be a owner of the business or hold a key management position. Either way, the loss of that person by an unexpected death could lead to the failure of the business. This is where key man life insurance policies can help the company.
A key man life insurance policy insures the life of key personnel. A business must go on even in the event of a unexpected death. What this type of policy does is provide the company with a cash payout to help them replace the key person without interrupting the progress of work.
When an owner dies it can mean the closure of the business. With a proper insurance policy in place, the business can survive the death and continue to operate at normal levels.
This is a type of policy that is commonly found in larger corporations that have many things at stake should a key person pass away. Many employers realize the importance of this employee and know that an unfortunate event could mean the demise of their company. The company owner than places a policy against the life of the employee, and should anything happen, becomes the beneficiary of the policy.
While this practice may seem a little morbid, it is very common in the business world. Key man policies are not very expensive and most large companies use the program successfully. Owners of small businesses also use this program when they want to ensure the continuation of their company after they pass away.
Key man insurance premiums are paid by the company and only by the company. Employees are not required to have this type of insurance. Employees also are not required to pay for this insurance if a policy is taken out against their lives.