Key person insurance is a smart investment for any business leader looking to safeguard the future of their company. Often, key person insurance is an integral part of a wider business succession plan, and it acts to give businesses a vital safety net. Quick reminder: key person insurance is a life and disability insurance policy that a business takes out on an essential team member. Should that essential team member either die or become unable to work for an extended period of time, the business would then receive compensation to cover a variety of related losses and expenses.
However, key person insurance is not a free service.
What does key man insurance cost exactly? Here, we’ll explain how much businesses can reasonably expect to pay for key person insurance, and what they can do to ensure they get enough coverage without ever over-paying for it:
Key person insurance –– like any other form of insurance –– varies in price from person to person. To begin with, the cost of a key person policy depends on some basic factors like the individual in question’s current health, age, and lifestyle habits. For instance, smoking is a bad habit that is notorious for driving up the cost of life and disability insurance.
What’s more, insurance carriers must also take some additional factors into consideration when they provide key person insurance specifically. These extra aspects include things like the person’s salary, their contribution to overall business revenue, and the amount of time it would take for a company to replace them. In addition, some individuals in high-risk fields may cost more to insure than the “average” employee.
Level of Insurance Needed
Getting a good deal on an insurance package often comes down to balancing the need for coverage with the desire to save money. After all, no business should invest in insufficient coverage that doesn’t provide all of the funds needed in an emergency. Alternatively, it doesn’t make sense to pay for more insurance than required. So figuring out the level of insurance your company needs will go a long way toward forming an accurate estimate of your future premium costs. (Note, you can use our free key person insurance calculator to get a ballpark figure for your situation.)
Before a business leader begins to compare potential insurance providers, it’s important to keep a few things in mind.
First, different insurance carriers use different means to determine a person’s health. So one individual looking for life insurance could receive two very different policy offers from competing insurance providers at the same time.
Second, insurance carriers and agents offer quotes (estimates) BEFORE their health evaluations are complete. In practice, this means that the quoted price for an insurance policy will not necessarily reflect the actual price that a business has to pay. Thanks to our WayPilot Program, though, we can help businesses compare accurate prices from competing insurance carriers after they’ve completed their medical evaluations. This takes the guesswork out of picking the best coverage. Click here to learn more about this unique service.
In truth, the cost of key person insurance is negligible compared to the many substantial costs associated with losing an essential team member unexpectedly. At Helm Financial, we have the experience, resources, and knowledge to ensure you get the best coverage at the lowest rates possible. Contact us here to get started!