We’ve talked about both life insurance and Keyman life insurance policies in previous articles. Still, with the pandemic coming to an end (at least in our heads), we are seeing an uptick in both of these policies and wanted to remind you that it is a good thing to review policies regularly.
The Pandemic Changed the Game for Everyone
As we all know, COVID-19 has changed all of our lives immensely. From the way we travel (or don’t travel) and do business to how our kids and family members handle school, work, etc.
We’ve all been impacted one way or another, and for most of us, in many different ways. I’ve seen several recent articles stating we’ve surpassed 1 million deaths in the US related to COVID. There have also been some unfortunate things that have happened, from the long-term side effects of “Long COVID” and the immense loss of life we have experienced in the US and worldwide.
One major thing I am seeing from business owners for themselves and their employees is a renewed sense of importance for life insurance policies. At the group/company level, life insurance is one of the most affordable group benefits that a company can buy. Most employers will purchase a term policy for full-time, active employees from $25,000 to $50,000 (or more). The employees then can purchase additional life insurance for themselves and their families (voluntarily), which is then payroll deducted.
Why Should You Offer Company/Group-Level Life Insurance?
Your Employees Likely Don’t Carry Life Insurance at All
Policies are typically affordable and cost less if the employee is on the younger, healthier side. Most of your employees probably aren’t carrying any life insurance at all, especially if your employee base is on the younger side.
Something else to consider on the group side is that there usually is what’s referred to as a guaranteed issue provision which allows purchasing a certain amount of life insurance without underwriting questions. People who have pre-existing medical conditions may not be able to get any individual life insurance due to their medical history. Still, in the group environment, they can get at least up to the guaranteed issue amount for the employer-paid policy and the voluntary buy-up option if they opt in when it is first offered. This could be the only life insurance someone can qualify for and/or afford in many cases.
Protect Your Business in the Event of the Loss of a C-suite Executive
On the other side of the coin, you have the chief executives’ company-paid life insurance policies (aka keyman insurance). The way this works is that a company pays for and owns an individual policy for its C-Level or key employees, with the company set up as the beneficiary.
The thought here is that if something happens to a company’s key executive, what then happens to the company? If your CEO or COO disappears, does your company go under? Hopefully not, but this would have a significant negative impact on the business in many cases.
One way to help mitigate that risk is through these types of policies. In that same example, say someone’s COO unexpectedly passes away, and let’s pretend that the COO led sales and operations. Those are two critical areas for a business. So what happens next? Those without a policy will probably scramble, lose revenue, and lose some at the leadership level, likely impacting most companies.
A Keyman policy will NOT help in all of these situations, but let’s say this happened, and you had a million-dollar policy in place on that same COO. If the Chief Operating Officer was heavily involved in sales, the injection of cash into the company could help offset the temporary revenue loss. This would also provide the funds to hire a new COO or hire a search firm to start the search.
We have done several Keyman policies in the first half of this year, all for different reasons. Still, like international travel insurance, these have been very topical in our business, so we wanted to take a few minutes to share what we are seeing and regularly doing for other clients and educate them.
Still, Have Questions? Give Us a Call!
Thanks for the read! I hope you learned a little something here in these articles. If we can help you or your business look at any of these policies, please reach out. We’d love to help.