What should he do to protect his company?

Konrad is the owner of CrossBoy, a manufacturing company employing over 50 employees. Konrad recently took out a $500,000 loan to expand his business. Terrence works as a sales manager and is responsible for roughly 40% of the company’s revenue. Konrad recognizes the importance of Terrence’s contributions to the success of the company. Therefore, in addition to a sizeable base salary, CrossBoy also pays Terrence regular performance-based bonuses. Konrad understands that if Terrence dies prematurely, CrossBoy would suffer financially.

What should he do to protect his company?
A . Offer Terrence group life insurance plan.
B . Purchase business-owned buy-agreement with Terrence.
C . Purchase key person life insurance on Terrence.
D . Purchase criss-cross insurance with Terrence.

View Answer

Answer: C

Explanation:

Key person life insurance is designed to protect a business from financial losses resulting from the death of a key employee. In this case, Terrence’s role is crucial to CrossBoy’s success due to his substantial contribution to the company’s revenue. By purchasing key person insurance on Terrence, Konrad can ensure that the company has the necessary funds to cover the financial impact of Terrence’s potential loss. Other options, like offering a group life insurance plan (A), do not directly address the specific financial risk associated with the loss of a key employee. Therefore, Option C is the appropriate choice.