Key Person Insurance
BECAUSE LIFE IS UNPREDICTABLE

Every business operating today has key people that help it remain successful and profitable. Although most insure their property and profits, few think to insure their most previous assets – the men and women whose experience, talent and judgment contribute substantially to the financial success of the business.

Owners of a business are natural “key persons,” but key person could be anyone whose early death could result in serious economic loss to the business. Have you ever considered what could actually happen as a result of an unexpected death of any of your employees?

Funding a Key Person Plan with Life Insurance

Permanent insurance (universal life or whole life) is generally preferred because of its accumulating cash values and versatility. Plus these additional benefits:

• SECURITY. You are protected from the financial hardship of a loss.
• ELIGIBILITY. The company is the applicant, owner, beneficiary, and premium payer for a policy on a key person. No prior IRS approval is required.
• TAX-FREE PROCEEDS. If a key person dies, life insurance benefits are received as tax-free income.*
• ASSET VEHICLE. Policy cash values are an asset of the company and are available if needed.
• SUPPLEMENTAL BENEFITS. If the key person works until retirement, policy cash values may be used to supplement retirement income.

A sobering statistic, yes. But it’s a reality.

Have you thought about what will happen to your carefully built business if you pass away? The scenarios are many. Heirs may insist on being involved. Employees could lose their feelings of security. Creditors could become nervous due to the perception of a weakened condition of the business. Or, surviving owners could be caught with no cash to fund a buyout.

A business continuation plan is essential to the survival of any business and involves at least two components: A Buy-Sell Agreement and a funding vehicle for this agreement. Your own complete business continuation plan is one great way to ensure your legacy – the future continuation of your business.

The Buy-Sell Agreement

A Buy-Sell Agreement can keep your dream alive by providing for the proper transfer of ownership of your business to the successors you choose. Created through a simple written agreement between you and your partners or other shareholders, it specifies buyout provisions in the case of death, disability or retirement. Properly drafted, a Buy-Sell Agreement can:

• Create a “guaranteed” buyer for your business.
• Allow those who are interested in continuing your business to do so without interference from your heirs who are not involved in your business.
• Provide liquidity for your estate by turning the business interest into cash.
• Establish the value of your business for federal estate tax purposes.

Funding a Buy-Sell with Life Insurance

To ensure prompt execution of the Buy-Sell Agreement and to guarantee that successors will have the money to carry out this obligation, you will need appropriate funding.

While there are a number of methods available to fund this potential liability, life insurance is the only method that can provide cash immediately at death – cash that can be used by the surviving owner(s) to purchase your business interest from your estate.

Additional benefits of life insurance:

• Funds are assured from the beginning
• Death proceeds are generally free from federal income tax.
• Cash values can be used to assist in financing a buyout.
• “Discounted dollars” make it an economical choice.
• Your credit position is strengthened.

EQUITY INDEX TERMINOLOGY

Equity indexed life insurance is a unique kind of insurance plan with unique terminology. The following terms are used throughout this brochure, so the definitions are proved for your ease in understanding.

Annual Equity Indexed Segment Value Growth Limit (Cap) – The cap for the earnings that will be credited to a segment in a given segment year subject to certain minimums. This limit may be reset each segment year.

Index – The measure used to determine the index earnings. For Liberty Builder, the index is the S&P 500 Composite Stock Price Index** The actual index number is generally the value of the close of business the day prior to the date for which it is used.

Index Earnings – Index earnings for an individual segment are calculated by multiplying the annual index growth by the participation rate, adjusted for the cap, multiplied by the starting segment value. Index earnings will never be less than zero.

Participation Rate – Determines the percentage of the S&P 500 Index growth the policyholder is eligible to earn. The participation rate for Liberty Builder is guaranteed to be 100% for the life of the policy.

Segments – Each time a portion of the Basic Interest Strategy value is directed to the Equity Indexed Strategy, a new five-year segment is created. Values directed to the segment remain in the segment for the full five years. Each segment has its own participation rate (guaranteed at 100% for liberty Builder) and initial cap. Segment years are measured as successive 12-month periods from the date a segment is created.

TERM LIFE OPTION

Also available is a Term Life Option, a non-equity building lower priced plan.

Founded in 1896, AmerUs Life has a 100+ year history of providing quality products and services to its customers. But company financial security, reliability and strength need to be backed up by more than words. We’re pleased to share the results of recent reviews by independent insurance industry evaluators.

The A.M. Best Company, one of the nation’s leading independent analysts, has rated AmerUs Life A (Excellent), the third-highest of its 15 rating classes measuring ability to meet policyholder obligations. Standard & Poor’s has rated AmerUs Life “A” (Strong), the sixth highest of its 20 rating classes measuring financial strength. And, AmerUs Life has been rated A3 (Good) by Moody’s for overall financial strength. A3 is the tenth highest of Moody’s 28 rating classes.

AmerUs Life Insurance Company is a member company of AmerUs Group, which had assets of $17.6 billion as of June 30, 2001.

If a person is a business owner, a Key Person Plan and or a Buy-Out Plan usually is needed.

An alternative to the Equity Building Plan is the Term Life Product that is purchased for 10, 15, 20 or 30 year periods, building no cash value, but less expensive.