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Successful companies are built around a unique vision, a solid business plan, and a management team that possesses the drive and leadership skills to turn that vision into a profitable business. Whether a business succeeds or fails depends largely on how well a few key people can execute on the vision and the plan.
What happens if one of these key people is no longer in the picture? Can
the business survive? For many companies, the death or disability of a senior executive or chief technologist can be financially devastating. Intellectual capital, Relationships with key customers, and competitive advantages can all disappear in an instant. What once seemed liked a promising investment opportunity can struggle for survival.
As a preventive measure, many businesses and often the private equity firms that own them turn to key person insurance. Key person insurance can help alleviate the financial strain that results from the death or disability of a senior executive.
How It Works
To establish a key person plan, A party with a financial stake in the future of the business purchases a life and/or disability insurance policy on one or more “key people” in the organization. The purchasing party is the policy owner and beneficiary of any death or disability proceeds. The key people are insured, but have no financial interest in the policies under most designs.