Monday, December 17, 2018 13:00

Protect Your Church with Key Man Insurance

Insurance Polidy

Editor's Note:  This is a guest post from Gary Brunson, a good friend of mine who has years of experience helping churches make good decisions about insurance. 

A Baptist Church had a long-time pastor who was respected and loved by his church family.  While on a family vacation, he was tragically killed in a car accident.  The grief and loss hit the church and its members hard.

This tragedy affected the church in many ways. The loss of a beloved pastor took a heavy toll on the church. Not only did they lose their pastor, but consequently they also lost many members over the next several months.  While the dynamic pastor was leading, many had been willing to drive quite a distance to church.  When the pastor was gone, they soon found other churches to attend much closer to their homes.  Loss of people sadly translated into a loss of 25% of annual income for the church.  

The good news is that the church had in place a Key Man Insurance Policy. This money allowed the church to survive not only the tragic loss of a beloved pastor but fund church operations until they could rebound from the losses of people and offerings.

Key Man Insurance is simply a life insurance policy on the pastor naming the church as a beneficiary.  The premiums are paid by the church, and when the insured dies from an accident, heart attack, or other cause, the church becomes the recipient of the death proceeds.

If while the policy is in effect the pastor moves to another church, the current policy can be canceled and a new policy issued on the new pastor.  The policy usually is medically underwritten, so it is important when securing a new pastor to check into whether he or she can qualify for such a policy.

The Key Man Policy can be written using a variety of policies.  The most common is a term life policy for a period of time.  Usually a 5-, 10-, or a 15-year policy is chosen.  Other policies grow a cash value within the policy, and the church retains ownership of those funds.  Your leaders can determine what options make the most stewardship sense.

Many mortgage companies now require a Key Man Policy be issued on key church personnel for a specified percentage of the outstanding loan.  Usually this amounts to enough that the church can make its mortgage payments for a year or more.  The actual death benefit can also be reduced on the Key Man Insurance over the years as the debt is decreased, thereby reducing the premium being paid for the policy.

I know of another church situation where the pastor died from a heart attack and had no personal life insurance. He and his wife had been living in the parsonage, so upon his death his widow had no place to live. With foresight, the church could have taken out a Key Man Policy naming the pastor’s wife as a co-beneficiary on a percentage of the policy.  The death benefit would have helped to meet his widow’s needs also. There are a variety of ways this kind of life insurance can help people and churches.  

Let a professional Life Insurance Agent help your church evaluate whether you have a need for this type of protection or not.  They will look at the church's debt numbers, the mortgage payment, and assess the situation to determine the best direction for your church to go.

Gary T. Brunson, LUTCF

The Gary T Brunson Insurance Agency Inc

11178 Huron St., #6

Northglenn, CO  80234

(303) 452.5617

www.brunson.guideone.com

 

 

 

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