What’s the difference between a mutual insurance company and a stock insurance company? What’s key person insurance? Your clients and propects might ask you questions like these all the time. Click through this slideshow and you’ll be better able to answer them, in easy, understandable language.
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Key Person Insurance: A life insurance policy placed on the life of an important person within a company. The policy proceeds are used to offset the monetary loss experienced by the company due to the person’s death. The employer is usually the owner, beneficiary and payer of the policy.
Just the facts
A key person can be anyone directly associated with the business whose loss can cause financial strain to the company. For example, the person could be a director of the company, a partner, a top sales person, a key project manager, or someone with specific skills or knowledge that is especially valuable to the company.
Life Settlement: The sale of an existing life insurance policy to a third party for more than its cash surrender value, but for less than its net death benefit. Policyholders may choose to sell a permanent life insurance policy for reasons such as changing needs or unaffordable premiums. Instead of letting the policy lapse or terminating the policy with the issuing company for the cash surrender value, policyholders who no longer want their policies should investigate this option.
Just the facts
- Life settlements can bring, on average, three to five times more than the cash surrender value an insurance carrier is willing to give.
Source: Life Insurance Settlement Association
- Between 2006 and 2009, policy owners received $5.62 billion more by obtaining a life settlement than they would have received from insurers if they had surrendered their policies for the cash value.
Source: U.S. Government Accountability Office, 2010 Life Settlements Study.