Key Person Life Insurance
Ownership Protection
This insurance can also be known as Shareholders or Buy/Sell Insurance. The purpose of ownership protection is to provide the outgoing owner or their nominee with sufficient cash for the transfer of equity to the continuing owners, if a business owner passes away or becomes disabled. It is essential to have an effective mechanism in place for the transfer of equity and/or control if one of the owners is lost to the business due to death or disablement.
Revenue Protection
The purpose of Revenue Protection is to provide the business with sufficient cash to compensate for the loss of revenue and to cover replacement costs, if a business owner or key employee passes away, becomes disabled or is diagnosed with a serious medical illness. Note that revenue protection is not appropriate for a business that would not continue upon a key person’s death or disablement.
Asset Protection
The purpose of Asset Protection is to provide the business with sufficient cash to preserve its asset base, i.e. to repay debts, free up cash flow and maintain its credit standing, if a business owner or key employee dies or becomes disabled.