For key person insurance, a business buys a life insurance policy on a specific employee or employees, pays the premiums, and is the policy's beneficiary. The death benefit of the policy is paid to the company in the case of the person's passing.You can use that cash to pay for the expenses associated with finding, hiring, and training a replacement for the deceased person. If the business decides it can no longer operate, it can use the funds to settle debts, give investors their money back, pay severance packages to workers, and shut down the company lawfully. Key person insurance gives the business alternatives besides declaring bankruptcy right away.
To determine whether a business needs this kind of coverage, company leaders must consider who is irreplaceable in the short term. In many small businesses, it's the owner who does most things, such as keeping the books, managing employees, handling key customers, etc. Without this person, the business can come to a stop.
Employer-Employee Insurance:
Employer-Employee insurance is when an employee purchases coverage for the lives of its employees. The premium may be paid by the employer directly or through the financing of a loan to the employee for premium payment. The minimum or maximum number of employees who may be covered by employer-provided insurance is unrestricted. Any reputable company or partnership entity may serve as the employer. Employers and their employees both have insurable interests. An employee's life insurance might be offered based solely on this principal factor, provided that there is absolutely no moral hazard component in any particular plan. There are numerous reasons for firms to provide their employees with health insurance.
