Life insurance plays an important role in a business that you may not have realized. Companies use a variety of life insurance products.
Life insurance agents and other insurance specialists learn the versatility of life insurance as a tool for securitizing revenue not only for private families but also for corporate families in McGill’s Life Insurance agents and other insurance specialists.
These vital goals include:
- Key person indemnification
- Credit improvement
- Continuation of operations
- Employee benefits program
Indemnification for Key Personnel
When a small business relies on one person who is absolutely critical to the organization’s structure and success, key person indemnification is critical. In many cases, this is a CEO or CFO of a company, but it could also be a stockholder with a high level of expertise. If the loss of that individual will have a significant impact on management, sales, credit, or repayment to the company, financial protection must be provided.
Collateral and Credit Enhancement
Credit enhancement is anything that can help a company’s financial position while also opening the door to lending and strong banking relationships. Let’s say a company wants to capitalize on an opportunity but needs to borrow to do so, and the bank is willing but concerned about what might happen to the project’s key person. Life insurance can be used as collateral if that person is insured.
Business continuation insurance is purchased by a company or firm to provide the funds needed to continue operations and cover losses incurred in the event of the untimely death or disablement of someone critical to the business. This could be an owner, partner, or another employee without whom the business would be unable to function. Any change in partnership can result in the dissolution of the business, so partners should be insured for their stake in the company.
Plans for Employee Benefits
Employee benefit plans can cover disability, income replacement, medical expenses, and even death benefits. These are the group life insurance and pension plans. However, most plans do not allow the employee to select the amount of life insurance. Employers can also tailor variables to their specific requirements.
Want to learn more about life insurance? Read our article The Most Frequently Asked Life Insurance Questions.