The Pros and Cons of Key Person Insurance
Key person insurance is a type of life insurance policy that provides financial protection for businesses in the event that a key employee or executive dies unexpectedly. While key person insurance can offer several benefits to businesses, it also has its drawbacks. In this article, we’ll take a closer look at the pros and cons of key person insurance.
Pros of Key Person Insurance
1. Financial Protection:
One of the biggest benefits of key person insurance is that it provides financial protection for businesses in the event that a key employee or executive dies unexpectedly. This financial protection can help cover the costs of recruiting and training a replacement, as well as offset any potential loss of income or business disruption that could result from the death of a key employee.
2. Improved Creditworthiness:
Having key person insurance can help improve the creditworthiness of a business. This is because lenders may view a business as less risky if it has key person insurance, which can make it easier for a business to secure loans and lines of credit.
3. Tax Benefits:
Key person insurance policies may offer tax benefits to businesses. The premiums paid for key person insurance policies are generally tax-deductible, which can help businesses save money on their taxes.
Cons of Key Person Insurance
1. Cost:
One of the biggest drawbacks of key person insurance is the cost. Key-person insurance policies can be on the expensive side, especially for businesses with multiple key employees or executives. Additionally, the premiums for key person insurance policies may increase as employees get older or if they have pre-existing health conditions.
2. Limited Coverage::
Key person insurance policies may have limited coverage. For example, key person insurance policies may only cover death or disability, and may not cover other types of business interruptions or disruptions.
3. Difficulty in Determining Value:
It can be difficult to determine the value of a key employee or executive to a business. This can make it challenging for businesses to determine how much key person insurance they should purchase.
It’s important to weigh these pros and cons when you get this type of insurance to make informed decisions about whether key person insurance is right for your business. Now that you know the pros and cons of this policy, are you ready to protect your business? Contact us! At AIR Insurance, we are ready to help you build a custom plan that fits your needs with our “360º Insurance Guidance”. For more information, call +52 55 4444 6043 or send us an email at info@air.com.mx
The information in this article is subject to terms and conditions applicable at the time of writing. If you have any questions about the current applicability of this information, please contact an AIR Insurance Brokers advisor.
