Key Person Disability Insurance
Key Person Disability Insurance protects the Business from the loss of an Employee's services when that Employee is unable to work, due to sickness or injury. While there are policies that are specifically designed for this type of coverage, there are also riders available on some Key Person Life Insurance policies called Waiver of Specified Premium Benefits, which waive an asset-producing premium if the insured suffers a long-term disability.
When the life insurance is Indexed Universal Life (IUL), leverage via policy loans can release money from the policy to indemnify the Business for lost services. Such riders with some carriers may potentially provide a substantial benefit.
Also, the Business may decide pass all or part of the waived premium on to the insured as supplemental income during disability. For tax-paying entities, such payments are deductible to the Business. In such cases, the Business benefits with a reduction in taxes even if it passes the entire benefit on to the Employee. Such arrangements make up a component of the Business Pentafecta®.