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Protect Your Business With Affordable Key Employee Life Insurance Options
Just as individuals purchase life insurance to protect their loved ones, should they depart, this same concept can also be applied to businesses in the form of key man life insurance. Such coverage will insure the contributions of that MVP on your team.
A key employee is someone who has the skills, knowledge, or contacts, which would land an employer in financial straits if the employee were to pass away. Key employees are vital and near irreplaceable.
Think about the expenses that go with the loss of a key employee: recruiting, training, and establishing new business relationships. These tasks are both time consuming and expensive. There is also the chance that the company may have to restructure in order to counteract the loss of a key employee. The benefits of a key man insurance policy can provide resources for recruiting and training or restructuring.
Finding affordable key employee rates
For key man insurance, you get your pick of life insurance products. Because of this freedom, the least expensive option would be term life insurance.
Term life insurance coverage lasts for a fixed period and pays a benefit if the insured person passes away during the period of coverage. This works because most businesses rely on their key employees for “x” amount of years. Term life insurance awards the largest death benefit per dollar put in.
Key man insurance as an employee benefit
Aiming for cheap key man life insurance may not be the most cost efficient strategy when other expenditures are taken into account. If you are planning to provide your key employees with retirement funds, purchasing a pricier key man life insurance policy and using it as a way to fund their retirement plan will reduce expenses and satisfy both obligations.
Cash value life insurance policies are more expensive than term insurance, but they have the ability to fund a retirement plan. Unlike term life insurance, cash value life insurance policies can be continued beyond a pre-determined date, and as long as they are maintained, they will accumulate equity.
When you decide you are ready to receive the equity, you simply cash in the life insurance policy and use the value to fund a retirement plan. This action is called “surrender.”
There are two types of life insurance products that can fulfill cash value needs, whole life insurance and universal life insurance. They both have their differences in both product features and pricing.
It Pays Off
An added benefit of a cash value policy is, what if you key employee quits? You now have a term life policy, no employee, and the same restructuring costs you sought to protect yourself from. If you have a cash value policy, you are able to cash out the policy (as long as it had time to build equity) and use it to resolve your costly issues due to the loss of your employee: recruiting, training and or restructuring.
About the Author
Angela Rosas is a writer/blogger in the life insurance industry. Her life insurance journey can be found at www.myinsurancelife.com
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