The historic and commonly used term Key Man Life Insurance more properly should be named Key Person Life Insurance since these policies are available for either gender and either gender can be key to the financial success of any enterprise.
Key Man Life Insurance policies are company or organization funded and owned policies which are issued on the life or lives of employees whose demise would have a substantial financial impact on the surviving organization.
The Key Person can be male or female and typically might be one who has essential management, marketing, financial or technical expertise.
Key Man Life Insurance policies are state specific and not all insurance companies offer key man life insurance policies to residents of all states.
These types of life insurance policies provide permanent coverage on the life of the insured.
The premiums paid into these types of policies can remain the same for the duration of the policy.
Generally, the premiums must be paid for the policy to remain in force.
Cost for policy issuance is a function of the age(s) of the insured, their health condition, their smoking habits, the amount of life insurance coverage, and the payment period wanted.
A portion of the premium paid is credited to a cash value tax deferred cash accumulation account.
The issuing insurance company credits dividends and interest to policy owner's cash accumulation account. This rate varies from underwriting insurance company to underwriting company and changes from time to time.
Policy loans are available.
Key Man Life Insurance policies have a named owner, a named insured and named beneficiaries designations. These three different designations can be the same person, but in many situations they are not necessarily set up with the same designations. Which designation is best to use depends on different variables and situations.
Someone or a company or a organization can be the owner of these life insurance policies on someone else's life only when he/she or a company/organization has an "insurable interest".
Most Key Man Life Insurance policies are issued only after a medical questionnaire and in some cases only after medical tests.
Effectively, once a Key Man Life Insurance life policy is issued by the insurance company that policy is guaranteed without a new physical, no matter your health condition, as long as the owner pays the premiums on time.
The death benefit payable to a beneficiary upon the death of the insured is dependent on the claims paying ability of the issuing life insurance company.
Generally, the death benefit payable to a corporate or organization beneficiary is income tax free; however AMT might apply.
