The life insurance death benefit proceeds can be used a number of ways. The death benefit might help to keep the business financially afloat while you hire someone new, and could even be used if necessary to offer a sign on bonus to that new employee. If your key employee was responsible for the majority of the sales revenue the death benefit might be used to supplement the lost income to the business.

In the worst circumstances, if that employee was so vital that the business can no longer survive, the death benefit proceeds might offer enough cash on hand to close your business properly in lieu of filing for bankruptcy.

Cash value life insurance can offer you the flexibility and protection your business would need in a time of uncertainty. Perhaps your key employee(s) doesn’t leave the company due to his or her death, perhaps they just leave. The business would still own the life insurance policy on that person and a policy with cash value would have just that – cash value that the business could access in a time of need; perhaps to cover lost revenue or perhaps to offer a bonus to a replacement hire. Many permanent life insurance policies also offer a Substitution of Insured rider. What good does it do the business to own a policy on an employee that is no longer with the company? None. With a Substitution of Insured rider1 the business can request the new employee be added as the insured to the existing policy. This not only offers the business seamless key person protection, it prevents the business from losing any money paid into the previous policy.

Building a successful business takes a significant amount of time and financial commitment. Life insurance and specifically key person insurance can offer you financial protection in the event of a key employee’s departure or untimely death; protection that will help ensure the future success of the business you have worked so hard to build.

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