Plan for the People Your Business Depends On

A key person insurance review for your business is a first meeting where we check the facts before any policy is chosen. We look at who the key people are, what a loss would cost, and what coverage already exists. Only after that do we compare policy types.

NR CPAs & Business Advisors is a Miami CPA firm. It helps business owners, families and professionals choose life insurance, including Indian-American households and business owners. Life insurance is offered through a licensed insurance agent. Nischay Rawal is the licensed agent responsible for this page. Insurance is offered by the licensed agent, separately from the accounting practice.

What Key Person Insurance Is and Who It Is For

Key person insurance is a life insurance policy a business buys on an owner or employee whose work it depends on. The business applies for the policy, pays the premiums, and is the beneficiary. The Insurance Information Institute describes this coverage as compensating a business for financial losses caused by a key employee’s death or disability.

Typical key persons include owner-operators, top sales or technical leaders, and people who hold critical client relationships or licenses. The proceeds go to the company. It decides how to use them, such as covering lost revenue, recruiting a replacement, or paying a business debt.

This is a generic life insurance policy. It is not an investment or a savings plan.

Florida law sets rules on who may be insured. Under Fla. Stat. § 627.404, a business may obtain insurance on a person in whose life it has an insurable interest, provided it gets that person’s written consent, which is given by signature on the application. See Fla. Stat. § 627.404.

What a Coverage Review Checks Before Any Policy Is Chosen

A coverage review is the first meeting with NR CPAs & Business Advisors. It focuses on your company’s facts. We work through four questions:

• Who is truly key? We look at which people matter, and why the business would struggle without them.
• What would a loss cost? Lost revenue, recruiting and training costs, debt payments, and lender requirements all count.
• What coverage already exists? A policy already in force on the same person changes the answer.
• What is the policy for? The face amount should match a documented need, not a rule of thumb.

Only after these answers do we compare policy types. That order keeps the decision tied to your business, not to a product.

Policy Types and the Terms We Compare

Term life and whole life are the two policy types we compare for key person coverage. Term life covers a set period. Whole life lasts as long as the policy stays in force and can build cash value.

For each option, we review these terms in writing:

• The premium amount and how long premiums are paid.
• Any change in face amount or premium over time.
• Limitations and exclusions.
• Whether the policy is renewable or cancellable, and any age-based change.

Whole life policies show two sets of values. Guaranteed values and non-guaranteed values are shown separately. Dividends, if any, are not guaranteed. Any growth illustration comes with its limits, shown with equal emphasis.

Two Florida rules shape how the policy works later. Every insurance contract must give at least 30 days of grace for premiums paid after the first. See Fla. Stat. § 627.453. Where a policy contains an incontestability clause, Fla. Stat. § 627.463 limits the insurer’s right to contest the policy’s validity after the period the clause specifies, and defenses based on exclusions and restrictions are preserved. An incontestability clause bars only a contest of the policy’s validity. It does not bar defenses based on provisions that exclude or restrict coverage, whether or not those exclusions or restrictions are listed in the clause. See Fla. Stat. § 627.463.

The Tax and Cash-Flow View a CPA Brings

For an employer-owned key person policy, the death benefit excluded from the employer’s gross income is limited to the premiums and other amounts it paid for the contract, unless the notice-and-consent requirements of IRC § 101(j) were met before the contract was issued and one of the exceptions listed in § 101(j)(2) also applies. Separately, under § 101(c), interest on proceeds the insurer holds under an agreement to pay interest is included in gross income. The IRS explains this in its life insurance proceeds FAQ.

A business that owns these contracts may have filing duties. Under 26 U.S.C. § 6039I, an applicable policyholder that owns one or more employer-owned life insurance contracts issued after the law’s enactment must file a return. It shows the number of employees, the number insured, the total insurance in force, the name, address, and taxpayer identification number of the policyholder, the type of business it is engaged in, and whether a valid consent was obtained for each insured employee.

Under 26 U.S.C. § 264, the interest rule does not apply to key persons up to $50,000 of aggregate indebtedness on their policies. A key person is an officer or 20-percent owner, subject to a numerical limit.

We also look at cash flow. We review how premiums fit the budget over the years, and how any proceeds would be recorded on the company’s books. Tax and insurance are reviewed together, not as separate steps.

How the Process Works, Step by Step

The process runs in five steps. Each step builds on the last.

1. Coverage review. We gather the business facts, the key persons, and the purpose of the policy.
2. Written comparison. We compare options in writing. Any policy we recommend is named with its insurer, policy form, and plan type.
3. Application. Full underwriting requires health questions, and issue may depend on insurability. The key person must consent in writing before the policy is bought.
4. Underwriting and delivery. Timing depends on underwriting, so the schedule varies from case to case.
5. Ongoing review. We revisit the policy as the business, its key persons, and its lenders’ requirements change.

Why NR CPAs & Business Advisors for Key Person Coverage

NR CPAs & Business Advisors is a Miami CPA firm. It provides accounting, tax and business advisory services. Life insurance is offered through a licensed insurance agent, separately from the accounting practice. Florida law requires agents to make clear they are acting as insurance agents. See Fla. Stat. § 626.9531.

See Fla. Stat. § 473.3205.

Our team supports the coverage review with accounting and tax knowledge. This page is written for business owners in Miami, Fort Lauderdale, West Palm Beach, Orlando, Tampa and Jacksonville.

Common Questions About Key Person Insurance Reviews

Talk With Us About Your Business’s Key Person Coverage

If your company relies on one or two people, a loss could strain payroll, debt payments, and lender terms. A coverage review lets us size the policy to a documented need, so the decision rests on your numbers. Protecting your loved ones and the business they depend on starts with those facts.

To schedule your coverage review, contact our team. Bring a list of your key persons, your business debts and lender requirements, and any policies already in force.