New Hampshire Key Man Insurance
As a business owner you understand that any business is only as good as its people. This is especially true with small to mid-sized businesses that rely heavily on a few key employees for their expertise, management or sales ability. The loss of such a critical member of the team could be just as devastating as a fire that takes out your building and as equally damaging to the bottom line.
How do you protect your business against the unexpected death of a critical employee?
Key Man Insurance (aka Key Person Insurance) is a type of life insurance policy that is purchased by the business and retains all ownership rights to the policy on the life of the named key person. Should the key person pass, the death benefit is paid directly to the business and can be used however needed, which is typically to cover short-term losses and to help cover the cost of finding a replacement.
This policy is not a benefit for the covered employee's family or personal beneficiaries should their death occur. It exists to assist the company in recovering from the loss of an essential employee. Separate life insurance must be purchased if you wish to offer personal protection for the individual and their family.
Who Needs New Hampshire Key Man Insurance?
While all of your employees are valuable, there is often one or more whom you could not easily conduct your business without their contribution. This may include the following:
- Key executives
- Top sales people
- Proven managers
- Scarce specialists such as engineers, research and development scientists, etc.
- Highly skilled financial people
What Could Happen To My Business Without Coverage?
The death of a critical employee can be devastating to a business causing substantial economic loss due to:
- Reduction of earnings
- Disruption of management
- Impairment to business's credit
- Potential loss of customers to your competition
- Cost and time involved in finding and training a replacement
There are many types of commercial insurance that your business needs for protection; however key man, or key person, is often overlooked or only considered when a critical employee becomes very ill.
How Is The Amount Of New Hampshire Key Person Insurance Coverage Determined?
There are two methods typically used to assist the amount of key person needed to cover the loss of a critical employee:
- One-Year Profit Method: The amount of insurance purchased is equal to one year's profit associated with the performance of the key employee. This provides the resources needed to find and train a replacement for the key person.
- Capitalization of Salary: This method uses a capitalization factor typically between three and ten times the key employee's annual salary with five being the average. It is important to note that the more specialized the skill of the key employee, the higher the capitalization factor.
Other potential benefits:
Depending on the type of coverage purchased, policy cash values may grow on a tax-deferred basis. These cash values may be accessed by the business tax-free by taking withdrawals to basis and then switching to policy loans thereafter. Both the loan and withdrawals are not available on all types of this type of insurance so it is important to know if this is an option before purchasing a policy. Policy holders should also be aware that such loans and withdrawals may be subject to fees and penalties, along with any accrued loan interest that would reduce the policy's account value and death benefit.
Four reasons to contact HPM Insurance right now:
- HPM Insurance has been writing Key Person Insurance for years and can intelligently discuss the particulars of your business to ensure you make an educated decision regarding what is right for your business.
- It's easy to get a no-risk quote. Simply fill out this short form and we'll get back to you to set up a meeting either over the phone or in person to help you protect the future of your business.
- We have dedicated account managers assigned to specific clients. When you call to discuss Key Man Insurance, you will speak with one person every time. You will not be placed in a call center and have to navigate an endless phone menu.
- HPM Insurance is a local NH business with convenient offices in Amherst and Bedford, NH.