Individual life insurance policies provide a payout to a beneficiary in the event of the policyholder’s death. Key life insurance policies are similar, but the payout goes to to the company for which the policyholder was a key employee, rather than an individual.With key person insurance, you’ll have the financial support you need to keep your business afloat while you replace a key employee, or make any other necessary steps in moving forward.
Plenty of questions come up when you’re picking a key person insurance policy, and understanding these policies will ensure you choose the right one for you.
What is the purpose of a key person insurance policy?
Key person insurance often provides a company with a better alternative to immediate bankruptcy in the event of a key employee/owner/founder’s death. In addition to protecting your company from the loss of an employee whose work is vital to the company’s existence, it provides several other benefits.
- Some policies can become retirement bonuses for key persons
- Demonstrate a key person’s value
- Your business may be able to use the policy as a cash loan when necessary
- The policy can be used to pay off debts, train replacements, pay off investors, provide severance, and more
Is key person insurance tax deductible in Salt Lake City?
We’re often asked if key person insurance is taxable, and the answer is yes and no. Annual or monthly premiums for a key person insurance policy are generally not tax deductible if the taxpayer is a beneficiary of the policy. However, key person insurance payouts typically are tax deductible if they are part of the company’s claimed income.
Key person insurance policies can be tricky to navigate, which is why we recommend getting in touch with the experts at Salt Lake City Insurance to discuss the kind of policy you need and answer any questions you might have.