Key Employee Insurance- What is it?
Key Employee Insurance, in it’s simplest form, is a type of Life Insurance. These policies differ from other life insurance policies in that the business is both the owner and the beneficiary of the policy. The employee essentially has no rights or active participation in the policy. However, the business is legally required to notify the insured employee of its intent to purchase coverage on the employee.
A Business owner is the person or entity that purchases the life insurance policy and typically pays the premiums. The owner has the right to transfer, sell or change the terms of the policy.
The insured is the person upon whose death the policy would pay the death benefit. Therefore, premiums are directly tied to the health and lifestyle of the insured.
Beneficiary is the person or entity that would receive the death benefit should the insured pass away during the period of coverage.