Life Insurance


Insurance Decisions for the Life of Your Business


When it comes to life insurance, small business owners must consider both the team and the individual. Group life and key person insurance are designed to help employers protect their most valuable assets — people.


Many small business owners offer group life insurance to employees either as a benefit paid for by the employer, or as a voluntary offering whereby the employee pays for the premiums.


For policies paid by the employer, the benefit often is equivalent to a full year’s salary, an amount not necessarily sufficient for most people. For this reason, employer-paid policies often are viewed as “supplemental” to coverage an employee is assumed to already possess. Employees interested in greater coverage amounts, i.e., double or triple annual salary, can purchase additional coverage through an individual plan.


There are two basic types of group life insurance: term and permanent, or “cash value” life insurance.

To determine the group rate you will be charged to insure your small business, insurance companies weigh a variety of factors including:

Insurers also take into account special business-related factors that make one type of business more physically “risky” than another, i.e., marketing firm vs. roofing company.


Group Life Insurance Tips and Considerations

Key Person Life Insurance


In a small business, a few key people often are critical to the organization’s success. These individuals may be limited to the business’ founders or partners, or unique subject matter experts such as the senior marketing or sales manager, or in the case of a technology company, the chief engineer or software developer.


The death of any of these key people would likely have a serious negative impact on the business’ bottom line. That’s why businesses may choose to purchase Key Person life insurance. Should a designated key person die, as the policy owner, the small business becomes the beneficiary and receives proceeds from the policy.


The key person insurance benefit payout can provide to the business:

In some cases, for a small business to secure a loan or investor capital, the company may be required to carry life insurance on its principals. A bank may even request a collateral assignment agreement giving the financial institution first rights to policy proceeds to cover outstanding debt in the event of a principal’s deaths.


Key Person life insurance can be purchased as part of a company’s group term life or permanent life policies.


Because the coverage is for a specific individual, several personal factors can affect key person life insurance premiums including:


Age and overall health including general medical history, pre-existing and/or chronic health conditions such as diabetes, heart disease, cancer, etc.;

Key Person Life Insurance Tips and Considerations

As with all insurance, shop around and compare rates for comparable coverage from a variety of insurers.