Problem: Each owner and employee in a small business makes a unique contribution to the company's success. The death of a key employee can jeopardize continuation of the business. Not only is cash flow typically interrupted, but management continuity may be disrupted, the company's credit rating may falter, and valuable time and dollars can be spent finding and training a competent replacement.
Solution: Company-owned key person life insurance replaces lost profits and protects the business against the unexpected loss of its most important asset — the owner and other key people who make the company successful. Premiums are not deductible. Proceeds are received by the company tax-free under current tax law (except if the alternative minimum tax applies for some C corporations).
Reference: Key Person Insurance Adviser Guide (Form 2401), Client Guide (Form 2302), Key Person Client PowerPoint Presentation (ON-Net software download)
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