Confidential Contract Indemnity Life Insurance
At Diversified Insurance Brokers, we know that some agreements are too sensitive to be disclosed publicly—yet they still require absolute financial protection. Confidential Contract Indemnity Life Insurance, offered through Lloyd’s of London, is designed for situations where discretion, privacy, and enforceability are paramount. Whether related to business ventures, personal commitments, or unique financial arrangements, this coverage ensures obligations are honored even in the event of a key person’s passing.
Confidential Contract Indemnity – Lloyd’s of London
Discreet, enforceable protection for high-stakes, private agreements—tailored to your exact needs.
Why Confidential Contract Indemnity Matters
Some contracts involve significant sums of money, intellectual property rights, or personal obligations that are not for public record. If the party responsible for fulfilling the agreement dies unexpectedly, it can lead to disputes, financial losses, or breaches of trust. Confidential Contract Indemnity Life Insurance ensures that funds are available to fulfill these obligations without compromising privacy.
Who Should Consider This Coverage?
- Executives or business owners with private contractual obligations
- High-net-worth individuals with confidential personal agreements
- Entertainers, athletes, or public figures with sensitive sponsorship or service contracts
- Parties to undisclosed settlements or high-value financial arrangements
Key Benefits
- Complete Discretion: All underwriting and policy details handled with strict confidentiality.
- Contract Security: Guarantees that commitments are met regardless of unexpected death.
- Tailored Coverage: Policy designed around the unique terms and values of the agreement.
- Global Reach: Available for domestic and international agreements.
How the Application Process Works
Our advisors work directly with you or your legal team to review the contract terms confidentially, determine the appropriate coverage amount, and arrange a policy through Lloyd’s of London. The application process is streamlined and private, with measures in place to protect the nature of your agreement at every step.
Why Choose Diversified Insurance Brokers?
We specialize in complex, high-value life insurance solutions that standard carriers often cannot provide. With access to Lloyd’s of London, we can design coverage that addresses both the financial and confidentiality requirements of your agreement—ensuring your commitments are protected without unnecessary exposure.
FAQs: Confidential Contract Indemnity Life Insurance
What is confidential contract indemnity life insurance?
It’s a life insurance arrangement structured to satisfy private contractual obligations (indemnities, buyouts, guarantees) if an insured person dies. The policy proceeds reimburse or fund the covered obligation while keeping sensitive terms confidential under NDAs and limited-access documentation.
How is it different from traditional key person life insurance?
Key person coverage protects a business from the financial impact of losing a pivotal employee. Contract indemnity coverage is tied to a specific agreement—for example, an earn-out, private settlement, or guaranteed performance clause—so the beneficiary and triggers mirror that contract.
When is this structure commonly used?
Typical use cases include M&A earn-outs, confidential partner buyouts, private settlements, collateral for personal guarantees, high-profile endorsement or employment contracts, and loan covenants requiring mortality backstops.
How do indemnity triggers get documented?
The policy is paired with a confidential side agreement (or contract exhibit) defining the trigger: proof of death, who receives funds, maximum indemnity amount, and any allocation order. Carriers pay claims per the beneficiary/assignment on record; the contract governs how funds are applied.
Who owns the policy and who is the beneficiary?
Ownership varies: a company, a specially formed LLC, or a trust (e.g., ILIT or administrative trust). Beneficiaries can be the indemnified party, an escrow-like trust, or a lender with a collateral assignment. Structures are chosen to balance privacy, control, and tax treatment.
Can the arrangement remain confidential?
Yes. Confidentiality is maintained through NDAs, limited-access authorizations, trustee or SPV ownership, and narrowly drafted collateral assignments. Only the information required for underwriting and claims is shared with the carrier.
What underwriting and medical information are required?
Coverage amounts reflect the contract exposure, so financial justification is documented. Medical underwriting may range from accelerated to full labs depending on age and face amount. HIPAA authorizations restrict who can view medical records; many sponsors use third-party administrators to preserve privacy.
Which policy types are typically used?
Level term is common for short, declining risks; guaranteed universal life (GUL) or indexed UL can fit longer or permanent exposures. Riders like waiver of premium or conversion features may be added when future flexibility is valuable.
How are premiums funded and allocated?
Premiums can be paid by the beneficiary entity, split among counterparties, or reimbursed per contract terms. Agreements often spell out cost-sharing, repayment if a deal unwinds, and who controls conversions or beneficiary changes.
How are death benefits taxed in these arrangements?
Generally, life insurance proceeds are income-tax-free to the beneficiary if IRC requirements are met. Exceptions can apply (e.g., transfer-for-value, C-corp reporting, notice-and-consent rules). Coordination with tax counsel is essential.
Can we use collateral assignments or change beneficiaries later?
Yes. Collateral assignments are common with lenders or settlement obligations. Beneficiary changes are permitted if allowed by the agreement and policy. Many contracts include “release of assignment” language when obligations are satisfied.
What happens if the contract ends early or is renegotiated?
Options include reducing the face amount, changing beneficiaries, converting term to permanent coverage for other needs, or surrendering/canceling the policy. The governing agreement should outline the steps and any reimbursement provisions.
