Small business owners often understand the importance of having insurance to protect their loved one in case of their sudden or unexpected death. However, they may not know the differences between key person life coverage and personal life insurance. Although they are similar, the beneficiaries and coverage can be significantly different.
Personal Life Insurance
Individuals with personal life insurance, typically have a whole life policy. This means that it covers you for life. The beneficiaries are often family members. Depending on the plan, it can provide death benefits as well as a cash value that builds over the life of the policy. It may be used as a component of estate planning.
Key Person Life Insurance
Key man insurance is usually a term life policy, meaning it is active while the individual is employed with their company. The company pays the premiums, and the beneficiary is the employer. In the event of the key person’s death, funds from the policy go to the business to protect against financial loss.
Having both key person life coverage and personal life insurance can help protect a business owner’s company as well as their loved ones in the event of a catastrophic event. Coverage amounts and costs can vary, based on a variety of factors. Insurance professionals can help owners decide which options meet their needs based on their unique circumstances.