Total premiums paid are normally a fraction of the of the cash received as a death benefit. Creates cash for the deceased's family to replace lost family income and pay estate settlement costs. Key Employee life insurance is any type of life insurance purchased by a business on the life of a key employee. A key employee is anyone whom the business deems to have a substantial impact on the financial success of the business and is not easily replaced, especially in a small business that lacks a pool of candidates. Reasons for protecting a business after a Key Employee's death.
Death causes a loss of management skill and experience.
Client confidence may lessen resulting in a disruption in sales or production. Business may experience credit difficulties if creditors hesitate to extend loans. Expenses are incurred to hire and train a replacement. Advantages of Key Employee life insurance. Employer receives funds from policy's death benefit which can be used to train a replacement and pay other expenses.