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Simple English definitions for legal terms
key-employee life insurance
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A quick definition of key-employee life insurance:
Life insurance is an agreement between a person and an insurance company. The person pays a certain amount of money, called a premium, and in return, the insurance company promises to pay a specified amount of money to a designated person, called a beneficiary, when the insured person dies. There are different types of life insurance, such as whole life insurance, which covers a person for their entire life and has a savings component, and term life insurance, which covers a person for a specific period of time and does not have a savings component. Key-employee life insurance is a type of life insurance taken out by a company on an essential or valuable employee, with the company as beneficiary.A more thorough explanation:
Key-employee life insurance is a type of life insurance that a company takes out on an essential or valuable employee, with the company as the beneficiary. This means that if the employee dies, the company receives the payout from the insurance policy.
For example, if a company has a CEO who is crucial to the success of the business, they may take out key-employee life insurance on that CEO. If the CEO were to pass away, the company would receive the payout from the insurance policy to help cover the costs of finding a replacement and any other expenses related to the loss of the CEO.
Another example could be a small business owner who is the sole provider for their family. The business could take out key-employee life insurance on the owner to ensure that if something were to happen to them, the business could continue to operate and support the owner's family.