Executive Life Insurance is also known as key man insurance. Keyman as the name itself suggests, basically insures your business against the loss of a key person in your company.
On the occurrence of death of a key person of your company, the business may suffer due to the loss of management skills and if it is regarding a top salesperson company’s sales might also come down drastically.
The money from the insurance might also be incurred for the cost of and training of an efficient replacement who would be able to carry on with the responsibilities of the deceased key person.
Usually, it’s the small businesses that buy the executive life insurance policies but nowadays even the big Corporations are also taking these policies in large numbers.
Who is eligible for such a policy?
Executive life insurance policy can be considered to be taken for an employee who might be a key person and is extremely important for the company. He or She may be the director of the company, one of the partners of the company, a top salesperson, a project manager. The loss of any major worker who has specific skill sets can incur a huge impact or a huge setback to the company.
When to consider purchasing such an agreement?
If a higher official who has his ongoing activities in the company and in a vital position in the company can consider purchasing an executive life insurance policy for him. It is important to take such an agreement before the key person attains the age of 65. It is also advised that the Life safety policy should be taken along with the disability contract.
The combination of a disability and life safeguard policy gives you a comprehensive safety plan which will protect you against the temporary loss due to disability of the executive. You would save on the premium as well.
For how much should be a policy bought?
The amount of the policy is dependent on the executive’s annual salary, the size of the business, and debt in the business. Usually, the companies take a policy of about 2-3x the annual salary of the executive. But the policies are also been taken as high as 15x.
What does an Executive life Insurance cover?
- Insurance to protect profits. In the event of the death of an executive the insurance can be availed to cover up all the losses in the business due to the loss of the person.
- Protects the interest of the other shareholders. The policy enables the other shareholders to buy the deceased person's share in the company.
- Insurance against debts. The policy protects any banking loans or any other banking facilities taken by the deceased.
Executive Life Policy vs Disability Agreement
Executive Life insurance is completely different from a Disability agreement. The main difference being that lifelong policy is availed only in the event of the death of the key person that is in the case of permanent and irrevocable loss of the higher official. Whereas disability agreement is against any disability caused to the major person of the company and only on a temporary basis in which period the person is unable to work for the company.
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