How Key Employee Insurance Can Help Keep Your NJ Business Running
When it comes time for a New Jersey business owner to renew their TDB policy, they might consider privatizing for better service and cost savings. That’s also a good time to evaluate your other business insurance policies and employee benefits, including key employee insurance and business life insurance.
After all, it’s important to focus not just on your workers, but your company’s longevity.
What would happen if you or another key executive or top moneymaker died or became disabled? Would your business survive? Would your surviving spouse have enough time and cash flow to find another owner? If you lose a key executive, could you replace them without substantial damage to your business and your bottom line?
While these can be scary topics to consider, it’s important for a business owner – and especially someone in a small business who is on the front lines of operations – to think about their exit strategy and to make contingency plans in the event of the unthinkable.
You have a corporate responsibility, as the owner, to continue making payroll. And you have a social responsibility to avoid layoffs, if possible, even if you become ill or disabled. That’s where key employee insurance, sometimes called business life insurance, comes in.
What Is Key Employee Insurance?
In its simplest terms, key employee insurance is a life insurance policy paid for by the business or corporation that covers an owner, founder, and other topic executives. Without these people, the business may not be able to run profitably. The business – not an individual – is listed as the beneficiary.
Key employee insurance also pays out if a founder or key employee is injured, ill, or incapacitated and unable to work temporarily or permanently.
What Can Key Employee Benefits Pay?
The benefits can go toward payroll, lease or mortgage payments, operational costs, and finding and hiring a replacement for the employee.
If it turns out the company must shutter in the absence of its owner or key employee, the insurance can be used to help avoid bankruptcy. The funds can pay off debts, offer severance packages to workers, pay back investors and follow due process in closing. The money could also be used to start the process of selling the company if it still has value in the marketplace.
If the money is a partnership or has multiple owners, the funds can be used for the remaining partners to buy out the key employee’s shares.
How Does a NJ Business Owner Get Key Employee Insurance?
As with other life insurance and group life / AD&D policies, key employee insurance is offered as a term policy, which expires at the end of the term, and permanent life, which continues as long as premiums are paid.
The business can borrow against a permanent policy at a relatively low interest rate. It might also be able to draw from the cash value, although this will reduce the amount of benefit paid if the business needs to file a claim.
Key person insurance may be offered as a bundle with other ancillary benefits designed to serve your business and your executive suite, including buy-up coverage for group life / AD&D and disability benefits.
Your licensed EZTDB broker can help you find the best business life insurance policy for your New Jersey company. Reach out today.