Just released: How to raise venture capital in 2023

Download

Key Person Insurance & CFI

In the unfortunate event that an essential member of your team passes away, this coverage responds to many professional concerns. It provides funds to help your company recover from the loss and eases investor’s financial concerns while letting you focus on your team and business’s future.

Get a Quote

HOME » FAQ

Who is Key Person Insurance for?

Emotions run high when an essential member of your team passes away. Amid the natural grief, the loss might leave company leaders wondering how to handle the future. There might be investors to reason with, a new business future to reimagine, and team members to comfort. No individual’s death is more or less important than the next; however, someone with such significant responsibility often leaves a gaping wound in the professional world.

Investors

Key person insurance provides security that can be used to attract new investors and ease the concerns of existing investors.

Company

The payout can soften the blow of the disruption to operations by assisting with some of the costs associated with the loss.

Team

Uncertainty about job security is the last thing your team should be worried about following a tragic loss.

Why you need Key Person Insurance

Summary

Key person insurance, also known as key man insurance, responds to help the company after losing an essential member of the team. Like term life insurance, this policy provides capital to help the company move on without that specific person. Investors might worry about the financial impact they’ll experience after the key person’s death — but the payout capital helps ease these worries. Additionally, it helps companies find a replacement while letting other members focus on grieving and creating a new future for the business.

Reasons for getting Key Person Insurance
self funded icon Helps you to focus on your team and the future of your business
shield check Serves as a safety net to ease investor’s financial concerns
Provides capital to help your company recover from the massive loss
Interconnected

If an employee’s name or unique skill critically connects the company and its finances, their death could shutter the business for good.

Partner buyout

Many businesses are partnerships, but the partnership outlives one partner. The other partner often desires to buy out the deceased partner.

Top salesperson

Suppose a top salesperson passed away, causing the company’s finance to suffer significantly.

What does Key Person Insurance cover?

Key person insurance is similar to a traditional life insurance policy. Under this coverage, the business typically receives a death benefit if the key person passes away while the policy is active. Historically, like life insurance, key person insurance was challenging to get because of the paperwork, medical tests, and inflexible underwriters. But Founder Shield has reimagined this coverage, streamlining the placement approach and protecting your business more efficiently. We’ve created a custom product called Contract Frustration Insurance just for busy founders! Here’s how our product compares:

Traditional Key Person v.s Contract Frustration

Traditional Key Person Life Insurance

Founder Shield CFI
Length of term
 standard options include 1, 5 and 10 year terms. Most carriers are in the ten year space (with annual payments), so there are fewer options if you’d like a shorter term this policy is designed to be for shorter terms of 12 or 18 months. This is by design based on the the typical funding cycle of venture-backed startups
Underwriting
 full underwriting: blood, urine, possible EKG, retrieving doctor records and possible third party inspection. The process usually takes 4-6 weeks but can take longer due to scheduling conflicts. No medical exams, no doctor visits and no financial history requests. The policy can be bound within a day or two of receipt of payment. A 5-minute questionnaire is all it takes to get a quote. This is designed to be a frictionless product tailored for VC’s and startup companies.
Carrier Quality
 will always come from US “admitted” carriers (when placed by Founder Shield), meaning that the insurance companies are subject to additional state laws and regulations. In theory these policies are safer because a state fund will pay out claims if the carrier goes bankrupt and policyholders have more recourse for filing complaints with the state. This policy is “non-admitted”, which means that the carrier did not have to jump through any extra hoops to get the blessing (and backing) of the states in which the policy is offered. It’s backed by Lloyd’s of London, one of the most experienced, respected and financially sound A+ carriers in the world.
Limits
 more stringent guidelines that can make obtaining the limit you want challenging. Insurance carriers will consider the value and revenue of the company when underwriting which can be problematic for some venture-backed startups that are pre-revenue or just getting going. flexibility in the limits available to policyholders of up to $5m. If higher limits are required, we have relationships with traditional carriers that can offer policies with limits of up to $20M.
Claim payment
the policy will provide a lump-sum payment to the beneficiaries listed on the policy. The underwriting was done prior to the policy being bound. the policy will pay the net ascertained loss to the policyholder following the death of the key person. Underwriting is done at the time of the loss to determine its full extent.

Contract Frustration Insurance FAQs

No, not for Founder Shield’s CFI product. Traditional Key Person policies do require medical exams.

Founder Shields CFI underwriting is instant. Traditional Key Person policies can require three weeks or longer.

Founder Shield’s CFI covers total disability and sickness.

Although no set formula exists for deciding how much to buy, start by reviewing the financial impact a key person’s passing would have on your business.

How it works

Finding insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined & intuitive as possible.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

Latest Key Person & CFI Insights

linkedin sales navigator unsplash scaled
January 17 • Key Man

We created a new Key Man insurance product…and it’s awesome.

Key man insurance for startups doesn’t really exist in the life insurance markets.  There are a few reasons for this and I’ll explain the big...

Read Article
contract protection insurance featureed
April 4 • Key Man

Key Person Insurance Alternatives

Key Person Insurance can be a valuable policy for when the unthinkable happens, but it has its disadvantages. We examine Contract protection insurance (“CPI”) and...

Read Article