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Key Man Insurance

How to Estimate Key Employee Life Insurance Premiums

Alex Grammatic
Alex Grammatic / 2 Min Read

Some professionals provide extraordinary value to their companies. These employees may have highly specialized skills or knowledge. Or they may be responsible for a huge portion of a company’s overall sales revenue. Regardless, it’s important for any business leader to recognize just how crucial a key person truly is to their organization, and to take steps to safeguard the long-term financial position of their company. One of the best ways to do that is to secure a key person insurance policy

A key person insurance policy provides coverage for businesses should a key professional die or become unable to work for a prolonged period of time. In this arrangement, the business pays the premiums but also acts as the beneficiary of the policy. Of course, key person premiums can vary substantially depending on a number of factors. Today, we aim to shed a little more light on this subject and explain how you can estimate key employee life insurance premiums. 

Factors that Influence Key Person Premiums

In essence, three different factors act to determine the amount of money a business will have to pay to cover key person insurance premiums. 

The first thing to consider is the key person’s current health status. Remember, key person insurance is a life and disability insurance policy, so issues like a person’s overall health, their lifestyle habits, and their age will influence premium costs. 

The big problem with most quotes from insurance carriers is that they are given before a candidate’s health assessments are even complete.

Second, the amount of coverage a company is seeking will affect how much they have to pay for insurance. As such, it’s important for business leaders to understand how much key person insurance coverage they need before they begin shopping for it. Fortunately, you can use this calculator here to get a reasonable estimate for the amount of coverage your company may require. 

Lastly, different insurance carriers simply charge different premium prices based on their own internal standards. Unfortunately, this means that a company will almost certainly receive different quoted prices from different insurance carriers if they choose to apply for key person insurance on their own. 

Premium Quotes & Accurate Estimates

The big problem with most quotes from insurance carriers is that they are given before a candidate’s health assessments are even complete. So the actual premiums an insurance carrier will eventually charge may not match the quotes they provided at all. Indeed, quotes can sometimes differ from actual premium prices by thousands of dollars.

At Blue Herring, we know what a massive pain point this can be for businesses in need of key person insurance. That’s why we’ve developed the Rapid Protection Program to ensure our clients get the lowest price possible for the coverage they need. Unlike insurance carriers and other agencies, which provide quotes before health assessments and then change them after the fact, Blue Herring flips the process entirely by directly working with third-party medical companies. This way, our team gets the pertinent health information first, and then uses it to find the actual best premium prices offered by insurance carriers. Only a truly independent entity like Blue Herring can offer such a service.

If you’re looking to find an accurate estimate for key person insurance costs, then contact the pros at Blue Herring. We have years of experience working in this specific field, and we can help you protect the long-term financial interests of your organization.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations.

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