Replacing the Irreplaceable: Protection for the Disability of Key Employees

Photo of a chef cooking a meal.

What would you do if a crucial member of your team became too sick or hurt to work? What would happen to your business? To your customer relationships? To your remaining employees?

Key Person Replacement Insurance helps to offset the financial burden of losing a key contributor, by providing funds to help recruit a train a suitable replacement. Paid for and owned by the business, this disability insurance policy pays benefits to the employer if the employee becomes totally disabled.

  • Benefits can be used at the discretion of the business and cannot be assigned to the key employee.
  • The insured key employee is still fully eligible for Individual Income Protection (Disability Insurance) from Principal Life Insurance Company.

There are other benefits to such a policy, too.

  • When there are 2 or more business owners, the policy can be combined with Disability Buy-Out Insurance to secure short- and long-term protection.
  • The policy can help demonstrate financial stability to creditors and clients, even if it is never used.

Claiming policy benefits

To meet the definition of “total disability”, the insured must be unable to perform the substantial and material duties of his/her Key Person Occupation and not be working in any other occupation with comparable duties and/or earnings for the business.

Once the definition is met, the business receives either a lump-sum payment or a combination of lump-sum and monthly payments (depending on how the policy is structured).

Why Principal?

Key Person Replacement Insurance from Principal Life comes with important built-in benefits:

  • Guaranteed premiums
    • Once the policy is set up, the premium cannot change, and the policy can only be canceled under extenuating circumstances (such as the death of the employee or unpaid premiums).
  • Flexible payment methods
    • When setting up the policy, the business can choose how benefits will be paid.
  • Waiver of premium
    • Premiums are waived for the duration of the disability once the elimination period is satisfied, and any premiums paid during the elimination period are refunded.
  • Interrupted elimination period
    • Principal Life will combine different periods of disability to help reach the policy’s elimination period.

Talk to your advisor to secure protection for your business today.