Personal lines (auto, home, boat, personal items) policyholders can register to view and print policy documents, including auto ID cards. Directly billed policyholders can also view and print billing statements.
Directly billed policyholders can make a one-time premium payment online from your bank account or credit card using this feature.
Personal lines (auto, home, boat, personal items) policyholders can register to view and print policy documents, including auto ID cards. Directly billed policyholders can also view and print billing statements.
Directly billed policyholders can make a one-time premium payment online from your bank account or credit card using this feature.
Key-person life insurance is a valuable tool to ensure that a business has liquid assets on hand to meet any obligations created by an untimely death.
Key employees may be highly paid, responsible for management decisions, engender a special rapport with customers and creditors or produce a significant impact on sales. A business may have an insurable interest in key employees based on their level of influence on the business’ success.
A key person’s death can disrupt sales, production and potentially create credit issues. The business loses a valuable, experienced employee and must go through the time and expense of hiring and training a replacement.
It can create a side fund, borrow money or use current cash flow to meet immediate needs, but these methods have considerable drawbacks. If a key person is insurable, the preferred method would be life insurance.
The business obtains written consent from the key employee to purchase a life insurance policy on the employee’s life with the business as owner, beneficiary and premium payer. Premiums are a non-deductible business expense, but when properly done, the business receives the death benefit income tax free.
There are multiple ways to determine the proper amount of coverage for key-person life insurance. The simplest is the Multiple of Compensation method. Typically insurance carriers will allow a multiple of five to 15 times compensation as a reasonable amount of coverage. The older the key employee, the smaller the multiple. Two other methods are the Cost to Replace method and the Contribution to Earnings method. Both of these are more complex and should be calculated with the help of your financial adviser.
The main value of a key-person life insurance policy is the death benefit income when a key person dies. However, the policy is considered an asset on the company’s books and can be used as collateral for other credit needs. If the policy has cash value, it also can be accessed for current needs. Another option is that cash value in the policy can fund a deferred compensation agreement with the key employee, providing supplemental income for that person at retirement.
If you are a business owner and want more information on the benefits of key-employee protection, please contact your local, independent life insurance agent to find coverage that works for you.
Neither The Cincinnati Life Insurance Company nor its affiliates or representatives offer tax or legal advice. Consult with your tax adviser or attorney about your specific situation. For policy service and additional information, speak to an independent agent representing The Cincinnati Life Insurance Company. For a complete statement of the coverages and exclusions, please see the policy contract. All applicants are subject to underwriting approval. Products and riders available in most states.
