WILL YOUR COMPANY BENEFIT FROM KEY PERSON COVERAGE?

Key Person insurance is often called Key Man insurance or Keyman coverage. It is a policy taken out by a business to allow compensation for financial losses resulting from the incapacity or death of an important employee. Although there is no legal definition for it, Key Person insurance is an important type of business coverage. Another purpose of this coverage is to contribute to the continuity of the company. A policy's term does not exceed the point of the key individual's usefulness. Although this coverage does not indemnify actual losses, it does provide a fixed sum. The exact sum is specified in the policy's verbiage.

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Employers may obtain Key Person insurance for the health or life of a worker contributing special skills, knowledge or other contributions. To be considered for such coverage, a worker's contribution to the company must be uniquely valuable or consume a considerable portion of the company's worth. Employers obtain this coverage to offset the costs associated with losing the employee. Expenses such as hiring successors, decreases in business and training temporary workers are all important considerations for employers.

Who Qualifies as a Key Person. Anyone who is associated directly with the business may be considered a key person. In addition to this, individuals whose loss could result in serious financial strain usually qualify. For example, company directors, key salespersons, partners, key project managers or other valuable individuals with unique skills normally qualify.

Loss Categories for Key Person Insurance. For Key Person insurance compensation, there are four separate categories:

1. Insurance for protection of partnership interests and shareholders. As a rule, this type of coverage enables partnership interests or shareholdings that current partners or shareholders will buy.
2. Losses connected to the period when the key person cannot work, when temporary personnel must be provided and when it is necessary to pay for training and recruiting an adequate replacement.
3. Insurance for any parties involved in guaranteeing banking facilities or business loans. The value of the guarantee equals the value of the insurance coverage.
4. Insurance for profit protection. Some examples include offsetting lost income from cancellation of a business project the key person was involved in, lost sales or losses from delays. There are also several other types of losses.

The treatment of funds received and tax rules for premiums paid for key person coverage vary. In the United States, premiums are not tax deductible. To learn more about Key Person coverage, discuss the options with one of our agents.

MATCHING FEATURES & EXPECTATIONS FOR LIFE INSURANCE

Nearly 80% of employees believe that their Life insurance coverage is adequate. However, many working men and women who have Life insurance coverage haven't taken the time to evaluate their needs since the start of their first policy. This leaves them and their families at risk of facing trouble in the event of premature death. Working women who have Life insurance are more likely to admit that they don't know how much coverage they possess. They're also more likely to purchase inadequate coverage. A good estimate for adequate Life insurance is five years of salary combined with the amount of all current debts. However, about half of all men and women purchase coverage that is equal to the amount of debt they have combined with three years of salary.

Gender Issues. Women and men have different preferences regarding their Life insurance coverage. More men than women are concerned about contributing to their surviving spouse's living expenses. The main concern most women have is covering their final expenses. However, men and women who have children are equally interested in providing for them. The difference between having enough money to cover final expenses and providing for loved ones is significant. Policyholders are urged to study their policies in order to understand the terms thoroughly. It's also important to keep beneficiary information current.

Matching Needs and Policy Features. Many individuals are unfamiliar with their Life insurance policy's basic features. Studies show that several employees who say they have Term Life coverage think that it affords them financial protection. They also believe this financial protection will last for an unlimited amount of time. However, this isn't true. Term Life insurance only provides coverage for the specific term outlined in the policy. It's important to recognize that the key word in this type of coverage identifies it as a temporary policy. If the term ends and the policyholder doesn't renew it, coverage ends. Most Term Life insurance policies last for periods of 10, 15 or 20 years. However, some Term Life policies offered by employers may last for the entire duration of employment. If an employee quits or is terminated, the policy is also terminated. At the end of the term, the coverage may be continued. However, it's important to remember that continued coverage comes with a much higher premium.

Many employees are not leveraging Life insurance as well as they could be. In order to meet their needs, employees need to realize how valuable this coverage is in supplementing estate planning and retirement benefits. People must familiarize themselves with the Life insurance benefits offered by their employers. Some employers may offer living benefits, which usually include will preparation, beneficiary assistance and power of attorney preparation. Employers should never assume that what is offered at work is sufficient Life insurance coverage for an individual. It's best for employers to communicate this fact with employees. They should also encourage employees to analyze their needs to determine how much coverage they need. Although many people think that getting the right amount of coverage is difficult, it is a fairly simple process. The best way for employers and employees to analyze their insurance needs is to contact an agent who is capable of providing a professional analysis.

BEWARE WHEN SHOPPING FOR HEALTH INSURANCE

While shopping for Health insurance, consumers everywhere should beware of disguised benefit plans. They are often called limited medical benefits or mini-med plans. Although they appear to offer comprehensive coverage, these plans actually might provide very inadequate compensation in the event of illness or injury.

The benefits provided by these plans are not nearly the same as major medical insurance or comprehensive health coverage. Mini-med plans and limited medical benefit insurance policies are usually advertised as inexpensive alternatives to major medical plans. The level of coverage offered by both options can be very low. With major medical plans, there are limits placed on how much a consumer must pay for specific treatments or incidents. However, there are no limits with mini-med plans. In addition to this, there is a cap amount allowed each year. Plan members are responsible for any expenses incurred beyond that amount.

Since health plans with limited benefits come in many forms, consumers must be careful while comparing options. If an individual signs for one of these plans experiences a major illness or injury, inadequate benefits can put that consumer in a difficult financial situation. While the benefits of these plans are not comparable to comprehensive coverage, they are often advertised as such. The following are signs of a limited plan or mini-med plan:

• There are annual limits for what the policy covers.
• The plans require association memberships.
• They are often described as innovative or cost effective.
• The premium offers are only available during the period of open enrollment.
• There are no pre-existing condition exclusions.
• Pharmacy and medical discount cards are often sold as insurance.
• The companies usually make unsolicited calls or send frequent emails.

When shopping for Medical insurance, consumers should always ask questions. It is important to know exactly what a plan offers before agreeing to the terms. To avoid the costly effects of signing up for an inadequate plan, be sure to ask an agent for the following information:

• A detailed explanation of all benefits, exclusions and limits.
• The full address and name of the insurance company's underwriter.
• A detailed outline of coverage provisions.
• The agent's full name, address and National Producer Number. Agents should be licensed in the states they operate in.
• An explanation of what percentage of the monthly payment goes toward the premium and how much goes toward other fees.