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April 2, 2010 / Brett Cohrs

Key Person Life Insurance?

I’m mostly a property, liability, workers comp, auto guy, but on occasion, I’ll connect a client with a life and health policy.

Question of the week: Why would we take out a Key Person Life Policy for our Executive Director?

After some discussion with my contact for a particular insured, we landed on two main points:

1. How much does an executive search cost: What is the role your executive director plays? Is he or she particularly gifted in such a way that you will have to be very specific in recruiting a replacement? Will the compensation package require a bit extra than you planned for?

2. Does your executive director bring in income to the organization? Does she have key networking relationships that might be in jeopardy should her death occur? Does he bring in income through regular paid speaking engagements, classes, etc? Will this income fall by the wayside, at least temporarily, should he die?

It’s a good coverage to consider: key person life insurance. Talk to your agent about options. Discuss with your board or management about whether or not this is a good idea for your nonprofit.

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