What new key-person insurance underwriting requirement should people be aware of?
Corporate-owned life insurance has driven production in life insurance policies where the corporation is the beneficiary and uses the proceeds to fund corporate liabilities and other benefit programs. This aggressive sale of corporate-owned life insurance has caught the eye of the SEC and IRS. There is now a new requirement when one writes a key-person policy that the insured has to sign a statement acknowledging that he or she understands what the purpose of the insurance is and that he or she knows that the beneficiary is not a personal beneficiary, but rather a corporation. This safeguards against ‘phantom insurance’ and aims to reign in this practice that has been abused by certain insurance providers. JOHN COOKMAN is area executive vice president for Arthur J. Gallagher & Co. Reach him at john_cookman@ajg.com or (818) 539-1260.
