Disability Insurance of Key Persons

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Key Person Insurance is a type of disability insurance that provides the most affordable solution to all types of business.


A. Office overhead spend of key person disability insurance:
It is the insurance that reimburses the individual for actual business expenses incurred after the key person disability commences such as such as rent, staff salaries, business mortgage loan interest, depreciation or loan principal, and leased or rented equipment. Included would also be telephone, utilities, property taxes. and this kind of insurance generally have below figures
1. Waiting period: 30, 60, 90. 180 days are common.
2. Benefit in general is between $1,000 to $20,000+ and paid monthly.
3. Benefit period: 6 – 36 months.

B. Buy out key person disability insurance for Partnership and small corporation
As we mention in the other article, after a lengthy or permanent disability becomes apparent, buying the disabled party’s business interest becomes increasingly important. because
1.The business may lose money and suffer
2. The survivors face increased difficulties and frustration.
3. The financial position of the disabled person will deteriorate and both sides fear loss of income and assets.
4. In the event of disability without insurance, the buy-out is left open to the uncertainties of chance and negotiation. In such cases, the seller will usually be under a lot of stress/distress. The best solution is required that the parties enter into a buy-sell agreement prior to the disability of the key person and it is funded by criss-cross agreement. Insurance companies will issue both personal disability policies and buy-out insurance on the same life payable on the same disability.

C. Advantages of key person disability insurance
The amount of the benefit provided to the disabled key persons are generally advantageous to the business as well as to the insured.
1. Premium paid to the insurance company can be included in the budget as a fixed expense.
2. The insurance policy automatically provides the funds at the time of greatest need.
3. The premium paid in generally is cheaper than any of the alternatives.

D. The following conditions will usually apply when insurance is used to provide the funding for the buy-out:
1. Third party insurance (owned by a partner or shareholder) must be issued for the agreed upon price and ownership is not transferable.
2. Usually the company needs to be in business for two years or more and show signs of profitability.
3. Financial statements of the business must be submitted prior to issue of the insurance.
4. Normally this type of disability insurance buy-out agreements insurance have a long waiting period of one to two years. The benefit, if monthly, may have a payout period of up to five years.


E. Paid out
There are 2 types of paid out:
1. Monthly Pay-out: the pay-out is paid in monthly installments for the guaranteed term
2. Lump Sum: the pay-out is paid in one large lump sum payment.

I hope this information will help. If you need more information of the above subject, please visit my home page at:
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://businessinsurance23.blodspot.com