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"Key Person" Life Insurance and HIV Disclosure (Editor's Pick)
Jun 1, 2015

I have worked for a sole proprietor for almost eight years now. She has basically become my mentor and is helping me to get into the business that we work in. She has paid for my education and has put me on her contingency plan (in the event her "plane goes down," I take over the business). This is a business she has spent the last 30+ years building, so needless to say, I have found myself in a very fortunate and unique situation. However, as she has become to depend on my skills more and more, she has come to me to ask if she can take out a Key Man insurance policy on me? (If I die unexpectedly, she will get a lump sum of money to help cover the loss of business that will occur, should that happen). I have hardly disclosed my status to anyone in my life, let alone my boss, so I am unsure how to tell her that I can't fill out the application because I will be denied? Any suggestion for how to go about telling her that I am not comfortable applying for it without disclosing my status? I know I am not obligated to tell her, but we have a somewhat close relationship, and I don't know whether it would be better to be vague, or tell her my reasoning why. Any advice would be greatly appreciated.

Response from Mr. Chambers

You don't say what state you live in and that may be the key to this question. However, in a quick search I don't find any state that prohibits HIV testing for life insurance, and, unless prohibited by law, virtually all insurance companies will test for HIV as part of the medical underwriting process.

The only exceptions would be group life insurance through an emnployer which does not have medical underwriting unless the amount of insurance is very high, and guarantee issue life, sometimes called graded benefit life. The drawback there is they usually won't provide more than $25,000 and your mentor will need much more than that for Key Person insurance.

If she is willing, you and she may want to see if a financial planner might have an alternative to life insurance to fund a buyout agreement.


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