Key Person Life Insurance Company Review (2024)

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• Key person life insurance, also known as key man life insurance, is a type of policy a company takes out on a key contributor
• A key person policy is designed to protect a company and its employees from any financial losses associated with the death of a vital employee
• Companies may be able to avoid bankruptcy by purchasing a key person insurance policy on one of the co-founders

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If you’ve ever wondered what key person life insurance is all about, you may be a bit surprised to learn more about the process.

A key person life insurance policy is a policy that a company takes out to insure the life of one of the company’s most important employees. Key man insurance — as it was formerly known — is intended to help the company recover from any losses associated with the death of a key contributor.

As you shop for life insurance coverage, you will not need to consider a key person policy unless you own a small business. You will still want to make sure you do your homework to find the perfect term or whole life insurance policy that works for you. This will help you avoid paying too much for coverage.

You can use our free quote tool above to find and compare cheap life insurance rates from some of the best companies in your area today.

What is a key person insurance policy?

While there is no ‘key personnel life Insurance company’ that strictly offers a key person policy, there are plenty of companies that can sell a policy to a business’s vital employee.

Since a key man insurance policy is designed to protect a company from losses once a key person dies or is disabled, the business is both the owner and the beneficiary. This is different from standard life insurance coverage in which the owner of the policy and the beneficiary of the policy are separate individuals.

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What types of life insurance can be a key person’s policies?

A business can use either a term life policy or a permanent life policy when purchasing key person coverage. 

Term life insurance, which covers an individual for a specific amount of time, is one option for key person’s life insurance. With a term key person life policy, the key individual would be covered for a specified term — typically anywhere from 10 to 30 years — and the policy’s death benefit would be paid out directly to the company if the individual passed away during the term.

With permanent life insurance, also known as whole life insurance, an individual is covered for the duration of their lifetime. Once the policyholder passes away, the policy’s death benefit is paid out to that individual’s beneficiaries.

In the case of a key person life insurance policy, the company would receive the death benefit of the whole life policy. Unlike a term life option, a permanent policy will never expire if the policyholder pays their premiums on time.

Why would a company need a key person policy?

If a business needs a loan, a key person life insurance policy may be required. Since small businesses are often dependent upon just one or two employees, the co-founders of many small businesses must purchase a key person policy to avoid going bankrupt. 

Key person life insurance  offers a financial cushion for companies. If the passing of one particular employee caused significant effects on the company’s profits, a key man policy would come in handy. This specifically applies when:

• One specific employee is tied to the company’s brand.
• An employee’s skill set is tied to a company’s performance or production.
• The loss of a particular employee could cause a reduction in business.
• The loss of a particular employee could destroy a company’s credit.

If a company is hyper-dependent on a particular employee, key person life insurance can be an alternative to declaring bankruptcy. The policy could help cover any outstanding debts and provide employee severance if necessary.

How much coverage do you need in a key person policy?

The amount of coverage you will need for a key person policy depends on the unique specifics of a company. Some of the more common methods companies use when determining the necessary level of key man insurance include:

• Multiplication of compensation. The compensation of a company’s employees is multiplied by the number of years it will take to replace them.
• Percentage of profits. The revenue is multiplied by the number of years it takes to replace an employee. This will depend on each specific company’s structure and annual profit.
• Cost to replace. The cost of finding, hiring, and training a new individual to replace someone else who left. A company will likely lose money during this time frame, which should be included in the calculations.

As you determine the details of these calculations, you’ll find it’s possible to include raises, bonuses, and other assumed information into your final numbers. The more specific you can get about the coverage amount, the more protected your business will be. 

Read more: What is the average life insurance coverage amount?

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How much is key person life insurance?

The cost of a key person policy is determined by the type of policy and coverage limit that the business purchases, along with the insured’s age, gender, and health status.

The table below shows the average monthly rates for a term life insurance policy based on age, gender, and the coverage amount.

Average Monthly 20-Year Term Life Insurance Rates by Age, Gender, and Coverage Value

In comparison, the next table shows whole life insurance rates based on age, gender, and the coverage amount.

Whole Life Insurance Rates by Age, Gender, and Policy Limit

As you can see, monthly rates vary greatly based on various factors. The only way you’ll know how much your business will pay in monthly premiums is to shop around for specific quotes.

Effortless Claims Handling With Key Person Life Insurance Company

Ease of Filing a Claim (Online, Over the Phone, Mobile Apps)

When it comes to filing a claim with Key Person Life Insurance Company, policyholders have the convenience of multiple options. The company offers a user-friendly online portal that allows policyholders to initiate and track their claims from the comfort of their own homes.

Additionally, Key Person Life Insurance Company provides a dedicated phone line for claim submissions, offering a traditional yet reliable method for those who prefer speaking with a representative. For those on the go, the company’s mobile app also facilitates the claims process, making it accessible anytime and anywhere.

Average Claim Processing Time

Key Person Life Insurance Company is committed to providing efficient and timely claim processing. The average claim processing time can vary depending on the complexity of the claim and the required documentation.

However, the company strives to process claims promptly, ensuring that beneficiaries receive their payouts without unnecessary delays. Policyholders can expect transparent communication throughout the claims process, keeping them informed of the status and expected timeline for their claim.

Customer Feedback on Claim Resolutions and Payouts

Customer feedback plays a crucial role in assessing the effectiveness of an insurance company’s claims process. Key Person Life Insurance Company values customer satisfaction and continuously seeks to improve its services.

Policyholders have reported positive experiences with the company’s claim resolutions and payouts. The company’s commitment to fair and prompt payouts has garnered praise from beneficiaries, enhancing its reputation as a reliable insurer in the market.

Exploring Key Person Life Insurance Company Digital and Technological Innovations

Mobile App Features and Functionality

Key Person Life Insurance Company’s mobile app offers a range of features and functionality designed to enhance the overall customer experience. Policyholders can easily access their policy information, view payment history, and even file claims directly through the app.

The user-friendly interface and intuitive design make it convenient for users to manage their insurance needs while on the go. The mobile app also provides valuable resources, such as educational materials and FAQs, ensuring that policyholders have all the information they need at their fingertips.

Online Account Management Capabilities

For policyholders who prefer managing their accounts online, Key Person Life Insurance Company offers a robust online account management platform. Through this platform, users can update their contact information, review policy details, make premium payments, and download important documents.

The online portal is secure and user-friendly, providing a seamless experience for policyholders to stay in control of their policies and financial security.

Digital Tools and Resources

In addition to its mobile app and online account management, Key Person Life Insurance Company provides a wealth of digital tools and resources to empower policyholders.

These resources include calculators to estimate coverage needs, informative articles on life insurance topics, and interactive guides to help users make informed decisions about their insurance policies. The company’s commitment to leveraging technology ensures that policyholders have access to valuable information and tools to make the most of their insurance coverage.

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The Bottom Line

Ultimately, key person insurance helps alleviate periods of uncertainty and ensures a business can continue to operate both financially and culturally even if it loses one of its key employees.  However, if you’re a sole proprietor business owner who runs your business alone, you won’t need key person insurance.

The use of life insurance can be a great part of a cross-purchase strategy and can avert financial hardship in the event of the death of a key-employee.

Talking to an insurance agent who specializes in these kinds of policies can also be helpful.

Be sure to use our free quote tool below to find and compare key man life insurance rates from some of the best companies in your area today. 

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