Disability Insurance

Key employee disability insurance protects your company in the case of an accident, injury or illness to one of your key people. It is designed to provide funds that will allow your business to continue without major disruption.

How Does Key Employee Disability Insurance Work?
Key man disability insurance is purchased on one or more key people in a business to offset any financial loss associated with the disability of a key employee. Your business buys the insurance and is also the beneficiary of any proceeds should a disability arise. Generally speaking, if an insured key employee becomes disabled, benefits will be paid, based on the terms of the policy, as long as the key employee cannot perform the normal duties of her regular occupation. Key employee disability proceeds can be used at the company’s discretion.

Key Man Disability Insurance Strategies
In today’s marketplace, key employee disability policies are not offered by many traditional insurance companies. Therefore, there are only a few options for a solid key man disability policy. In most cases, these policies are custom designed, within contractual guidelines, to meet your businesses exact needs. Key employee disability policies are very short term in nature as it is assumed that a capable replacement can be found within 12-24 months. In the event of a disabling injury to a covered employee, there are usually two payment options: a monthly benefit and an annual lump sum benefit.

Monthly benefit payout.
The monthly payout option states that after the initial “waiting period” or elimination period, benefits are payable at a monthly stated amount for the life of the key man disability policy which is usually 6-24 months depending on the company’s need. The waiting period must be satisfied prior to any benefits being paid. As long as the covered employee remains disabled, benefits will be paid until the benefit period expires. Depending upon the circumstances, benefits are generally “tax free” to the business.

Lump sum benefit payout.
The lump sum benefit payout option requires a longer “waiting period” or elimination period, usually 365 days before disability income benefits are paid. At that time, if the key employee cannot perform the regular and substantial duties of his occupation, the lump sum benefit is paid to the company and the policy terminates.
The monthly benefit or lump sum benefit amount is determined by a number of factors including the income of the key executive, the replacement costs associated with hiring and training a capable replacement and the key person’s contribution to the company’s earnings. Financial documentation to support the need for key man disability insurance will be required for every case.
Your company may choose to combine both the monthly and the lump sum approach for more comprehensive protection. Call NOW TOLL FREE at (877) 583-3955 for details on how to structure your key employee disability plan or request a key employee disability quote here.

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