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Key Person Replacement Insurance
A Key Person Replacement (KPR) insurance policy (HH772) provides benefits to a business if a key employee critical to the success of the business becomes totally disabled. Benefits can be used at the discretion of the employer.
The policy is conditionally renewable to age 65 with guaranteed premiums. Plus, key employees insured with KPR policies are not limited in the amount of Principal Life DI coverage they may qualify for.
Not available in California and not approved in all states.
Small- to medium-size businesses, with:
- Employees who have specialties or experience not easily replaceable
- Key person life insurance in-place or being considered
Typically sold to the following types of occupations - business owners, corporate executives, medical professionals, attorneys, engineers and other professionals.
- A key person is anyone critical to the livelihood of the business who is actively working-full time1 and does not own more than 50% of the business2
- Issue ages: 18 to 55
- Occupation classes: 3A/3A-M to 5A/5A-M
- Elimination Periods: Monthly – 90 or 180 days3; Lump sum – 180, 365 or 730 days
- Discounts: 10% Select Occupation and 20% Multi-Life4
- Maximum Issue Limits:
- Lump sum: Benefit based on calculation of three times the key employee’s earned income (salary plus bonus), up to $500,000.
- Combination of monthly and lump sum: Up to $750,000 total.
View additional guidelines (JJ1213KPR).
1 Works at least 30 hours a week in a key person position and has held that position for at least 12 months. Employee can only be insured as a key person under one business entity.
2 If the insured is an owner, the business must be in operation for at least one year for fee-for-service businesses and three years for others.
3 If both monthly and lump sum benefits are applied for, the elimination period on the monthly benefit must be less than the elimination period on the lump sum benefit.
4 Available when three or more employees with the same employer purchase Individual Disability Insurance from the same producer.
Premium rates depend on a variety of factors, including: age, gender, occupation class, smoking status and any available discounts.
Sample Monthly Premiums for a $200,000 Total Benefit
Assumptions: $100,000 annual salary, lump sum payout, 180-day elimination period, nonsmoker and 4A occupation class.
Key materials listed below.
Key Person Replacement policy highlights flier (JJ1364)
Explains how the Key Person Replacement policy works and how benefits are paid.
Employer Flier (JJ1363)
This flyer for employers addresses the need for both life and disability insurance key person solutions for businesses.
Key materials listed below. Additional materials are available.
DI Salary Continuation and Executive Bonus Presentation (DI8512)
For producers. This presentation discusses Salary Continuation and Executive Bonus programs and the tax advantages they provide. It also highlights DI Retirement Security and Key Person Replacement insurance.
This content is designed for use by financial professionals. Consumers may learn more about products and services on www.principal.com.