Who is a Key Man Insurance Beneficiary?

Before we get to know who is a key man insurance beneficiary, it is important to first understand the concept of key man insurance. An insurance policy bought to insure a key person is known as key man insurance. Key persons are those people who are of utmost importance in an organizational structure. Their absence or death would have an adverse affect on the overall growth of the company.

Therefore, a lot of businesses, nowadays, are going in for key man insurance. It is a perfect solution against any kind of financial adversity that may fall upon the business.

Who is a Key Man Insurance Beneficiary?

The company or the owner of the business is the key man insurance beneficiary. Upon the death of the insured, a death benefit is released by the insurance company.

Since the policy is in the name of the company, so the company pays all the premiums for key man insurance. The beneficiary of the death benefit is also the company. Therefore, it receives a lump sum amount after the loss of a key employee.

If any of the key employees dies, it can mean tremendous loss to a company. The loss is not just monetary, but also of time and expertise. To make up for this loss, an organization needs funds. Using the services of a consultant to search for a skilled person needs both time and money. And after the recruitment is done, the induction program starts. The new person would need time to settle down in a new organization and would require help at every step.

Key man insurance compensates for this loss of time and money. It provides the company with much needed financial stability to carry out its operations without having to worry about finances.

Who Should Buy Key Man Insurance?

Some small size companies often take loans for business purposes. To pay off these loans, these companies buy enough key man life insurance coverage. So, after the death of a key person in whose name the loan might have been taken, it is paid off by the key man insurance beneficiary.

The company that is the key man insurance beneficiary makes proper use of these funds. It makes sure that the money is used for developing business strategies and other things that take the company to an entirely new level.

Small scale companies should obtain key man insurance for its key employees. Since they have limited staff, they are at a higher risk of getting affected when a key person passes away all of a sudden. It will not be easy for them to make up for the loss if they do not have key man insurance at hand.

With the death benefit, a key man insurance beneficiary will be able to make up for the fall in sales and drop in revenues. The death claim that the key man insurance beneficiary receives is devoid of all taxes. So, there’s one more reason to invest in key man insurance.