What is key man insurance?

Key man insurance refers typically to life insurance policy that is taken out on the life of a business owner. The purpose of the key man insurance is to provide an influx of cash to the business in the event of the death of one of the business owners. The reason why this is important is that the company is going to need to replace that key man who is providing services or leadership in the business. The company is also going to require funds in order to pay the survivors of the deceased shareholder or owner for the value of the shares of the business because they don't want to be in business with their surviving spouse, or adult children, or [inaudible 00:00:46]. They need to pay off that family upon the death of that owner and the key man insurance provides funds to do so.
It's a really smart thing for business owners to get. I highly encourage any business owner to look into it particularly while you're younger and you're healthy so you can get good rates.