Key man insurance, also called key person insurance, protects your business if it loses someone it can’t easily replace. That could be an owner, a top salesperson, or a specialist with rare skills. If that person dies or becomes seriously ill, the policy pays your company. As a result, you have the cash to cover lost revenue, find a replacement, and keep the business running.
First, decide who is critical to your company’s success, such as owners, managers, or top producers.
Next, work out what losing each person would cost. For example, consider lost profits, recruiting costs, and any loans they personally guarantee.
The business buys a life or critical illness policy on each key person. The company owns the policy, pays the premiums, and receives the benefit.
In general, premiums aren’t tax-deductible. However, a life insurance death benefit paid to a Canadian corporation is usually tax-free, and part of it can flow to shareholders tax-free. Your accountant can confirm the details. For more, see the CRA’s corporation tax pages.
Our experienced consultants can help you:
Don’t leave your business exposed to an unexpected loss. Contact Nova Star Insurance Consultants today to discuss your key man insurance needs. The first conversation is free.
Send us a message! We’d love to hear from you.
