Key Employee Insurance – Why Get Key Employee Insurance?  

(Sometimes Called Key Man or Key Person Insurance)

Key Employee Insurance is a type of business insurance that can greatly reduce the effect an employee’s death or prolonged absence has on a company or other corporate body. The policy usually lasts as long as the employee remains useful to the company, and is thus terminated in the event the employee is replaced, quits, retires, or otherwise ends the relationship with the company. Here we’ll take a look at some of the benefits of taking out this type of insurance, as well as how it can be used to reduce the negative effects on a company due to an employee’s absence or death.

Certain employees, regardless of the type of business, are more critical to the success of the company than others. Some people simply have higher degrees of experience, more important roles, or even knowledge that is vital for the company to move forward. In the event that these people are incapacitated or die, the company can suffer greatly. Having a key employee insurance policy will help the company weather the negative effects of the loss, temporary or otherwise, of such an employee.

Key employee insurance typically works by paying out a cash benefit to cover several different types of expenses that may be caused by an employee’s absence. The types of losses that are frequently insured by such a policy typically fall into one of four categories. The first type are losses that are related to the period during which the person is unable to work, such as the cost of hiring temporary or permanent replacements for the person and the costs for training these personnel. Second, the benefits can be used to cover the profits that may be lost by the person’s inability to work, such as from the delay of a project the person may have been working on.

Third, sometimes the benefits are used to protect shareholder and partner interests. Lastly, key employee insurance benefits can be used to help guarantee loans and other banking facilities that may have been affected by the loss of the employee. If your business has a critical employee that you cannot afford to lose, this type of insurance is likely a very beneficial option. It will help you and your company stay afloat in the event that person can no longer work.

St. Croix Advisors can assist you in obtaining Key Employee Insurance.  Contact St. Croix Advisors to learn more.

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Contact St. Croix Advisors today to learn more. We are located in Hudson, Wisconsin, and serve a number of areas in Wisconsin including Hudson, Eau Claire, New Richmond, and River Falls, as well as the St. Paul, Stillwater, Woodbury area in Minnesota. Our services include wealth management, retirement planning, financial planning, estate planning, asset protection, life insurance, long-term care insurance and expenses, to mention a few areas. Our President, Brett Anderson, can assist you with any questions you may have prior to scheduling your first appointment. Brett can be reached at 651-337-1919 or  . 

This white page isn’t intended as legal or tax advice. This information is intended solely for informational/educational purposes of customers and clients of St. Croix Advisors. It is not intended to be used as a basis of tax or legal advice, and not intended to be used and cannot be used to avoid penalties that maybe imposed on a taxpayer or entity. You should seek advice regarding your particular circumstances from an independent legal, accounting, CPA, or tax advisor. A host of planning situations or tax consequences could have developed after the original date of this white page and may affect these discussions. 3/2010.