Key Man Insurance
Executive Bonus Plan
Protecting Against the Loss of a Key Employee
Business owners frequently use life insurance to protect their company from many of the potential problems which may otherwise impair or destroy what they have taken years to build. Life insurance is unique in that it will generally pay the pre‑determined amount no matter when the death occurs. The premiums are usually small compared to the potential death benefit. Also, policies are used which develop cash values, they can be shown as business assets of the balance sheet, helping to contribute to the value of the business and potentially to its borrowing power. Borrowing against the cash values may also be a lifesaving source in times of financial crisis 1
How Key Employee Insurance Works Company owns the policy. Company pays the premiums. After death, the company collects the policy proceeds.
Potential Uses for Proceeds Purchasing stock from the decedent's estate Honoring salary continuation arrangements to surviving spouse Finding, recruiting and training a new employee Strengthening the credit position Paying any necessary bills Funding expansion of the business Adding tax‑free corporate surplus.
1 Policy loans and interest will reduce the payable death benefit of a policy. If a policy lapses or is surrendered  with a loan outstanding, the loan will be treated as taxable income in the current year, to the extent of gain in the  policy.