Life Settlement Of Business Contracts

The life settlement of a business contract gives a business owner additional options over just canceling a policy or turning it over to his employee.

Key-man life insurance has been used for years to defray the cost of losing a valuable employee. Writing key-man insurance, however, can be far more difficult than some agents realize. To begin with one must define what makes the potential insured a key man in dollars and cents.

Selling key-man insurance to a business owner has been made easier with the added benefits of the life settlement. It gives the business owner a potential profit he never had before, which translates to another incentive to buy. Life insurance companies, however, require a great deal of documentation on what makes this particular person a key man.

I had a case recently where the CFO of a company had to spell out in great detail how the loss of the employee would impact the company. It was only a ten million dollar policy on an individual worth three-hundred and fifty million dollars. He had sold his shares to an investor group and had a ten year contract to run the company.

I thought the case was a “slam dunk” but I had to fight the underwriter to approve the coverage. The insurance company didn’t think he was worth ten million dollars. I finally got them to agree with a letter from the CFO outlining the impact of losing the employee who built the company before a suitable replacement was trained.

If you have a key man and want him insured, make sure you have a good life agent. For more information on key-man insurance and a life settlement of the policy when it’s no longer needed, please click our LIVEpdq.