Key person life insurance policy is meant to cover losses of the business if the key person gets disabled or dies. However, as a business, you might need a term life insurance policy instead of a life insurance policy. It has more advantages so long as you take cover for the time you might need it.
Term insurance policy is an insurance cover you take for some time like 20 years. If anything happens during the period covered, the insurance company pays up. But if the key person survives during the covered years, then the insurance company keeps the amount paid.
Here are advantages of key person term insurance policy.
#1. Low premiums
The amount payable to the insurance company, in this case, is smaller. If a company decides to take the cover of 20 years for its owner who is old, it means it is securing its future in case the owner dies. If there is a risk of the company losing the owner to the death between particular years, taking a term policy is better than life insurance. Fortunately, a term policy has low premiums but the same benefits as that of life policy when it matures.
Do you know the risk of abandoning a contract? You might lose a lot of money if you get sued by the person you agreed with. But, with term life insurance policy, once you stop paying premiums, that’s it. You lose the money, and you can never claim it if your key person dies.
But, term life insurance policy can be renewed or converted. If the period covered expires, then you can restore the plan, and the previous amount is imported into your new policy.
#3. Competitive prices
Key person term life insurance policy is highly recommended and readily available. Therefore, insurance companies tend to offer the cheapest coupon concerning the key person. So as a company, you will find many insurance companies from which you can buy a term policy that is highly affordable.
#4. It’s simple
Term insurance covers are as simple as they sound. The company pays the premiums for the chosen amount of time. If death strike key person during that period it gets paid. It’s as simple as that! You don’t have to understand complicated terms used in the insurance industry.
So when should you consider term life insurance on your key person?
- If your company is small, and you need to save money for running it, you still need to insure your key employee. In that contest, you can use the little extra cash you have to pay premiums for the key person.
- When you need to cover losses and your company is faced with the untimely death of a key employee.
- When you might need it as an insurance for other money lenders
Insuring your key employee is a clear indication that as a company, you think about the future. Therefore, if you are starting a business and you are the key to its prosperity, then you should consider relying on the best insurance company.