It`s never pleasant to think about worst-case scenarios, but the sad reality is that the loss of a key person in your business could have serious repercussions. If a key team member is absent, any business could suffer severely as revenue and profits drop and the workload of remaining employees increases. For an additional fee, your client does not have to pay their premium after 26 weeks if the insured person is unable to work due to illness or injury. Terms and conditions apply. You must be able to prove that your business would suffer a loss of financial profit in the absence of the key person in order to insure them as a key person. If you are a business owner – for example, if you are a director of a limited liability company – you can purchase key person insurance with the consent of the insured person. You must have a financial relationship with this person. The coverage can be used to repay loans and protect against lost profits, to service a loan of the key person`s remuneration or to hire a temporary replacement employee. The proceeds of the policy are paid directly to the company to replace the key person and cover any loss of profit. The proceeds of the policy could help your business continue to operate. Key person insurance is a life insurance policy that a company acquires for the life of a major executive.
The company is a beneficiary of the plan and pays the insurance premiums. This type of life insurance is also known as « key man insurance », « key woman insurance » or « professional life insurance ». In a small business, the key person is usually the owner, founders, or perhaps one or two key employees. The main point of qualification would be if the absence of the person sunk the company. If that`s the case, key person insurance is definitely worth considering. Key person insurance is required if the sudden loss of an executive would have a major negative impact on the company`s operations. Paying for the executive`s death essentially gives the company time to find a new person or implement other strategies to save the company. If a valid claim is made, the proceeds will be paid directly to the business, which could help them replace a key person, cover lost profits, and help their business continue to operate. A policy payment after the loss of a key person can help in the following situations: A key person can be anyone who is essential to the day-to-day operations of your business, such as a manager, employee, or someone whose skills, knowledge, and experience affect sales.
Or to put it another way: what responsibilities could a key person have? Determine if loans or financial obligations depend on this person, if their loss would affect sales, for example, or if their absence would affect future planning. Key People Protection is a way to protect your business from the death, incurable or serious illness of a key person in your organization. It is designed to pay a lump sum in the event of the death of the insured key person during the term of the policy and to compensate for the loss of skills, knowledge, experience or leadership. The amount of insurance needed depends on the company, but in general, a company should buy everything it can afford. Businesses should request quotes on policies of $100,000, $250,000, $500,000, $750,000 and $1 million, and compare the cost for each. Illness can be an inevitable part of life, but financial worries don`t have to be. While this is easy to say, in practice it is more difficult when it comes to small businesses. Did you know that 6 out of 10 businesses will go bankrupt within 12 months of losing a key person1? And every year, 1.6 million workers suffer from work-related diseases2. So what happens to a company when key people can`t work? For life insurance only: no maximum amount of coverage, subject to subscription.
« Key Man Insurance » means the same thing as key person insurance and refers to insurance policies that protect businesses against the loss of a key person – men and women – who is unable to work due to a critical or incurable illness or who has died during the term of a policy. To determine if a company needs this type of coverage, company executives need to determine who is irreplaceable in the short term. In many small businesses, it`s the owner who does most of the things – keeping books, managing employees and dealing with important customers, etc. Without this person, business would stop. Simply put, « key man insurance » is where a company insures itself against the financial loss it would suffer in this case. It`s about giving your stakeholders confidence that your business can survive and thrive even if you lose a key person to death or a specific critical illness. Key person protection can apply to anyone deemed essential to your business, but to help you think about your business needs, here are some roles typically covered by key person insurance: As your business grows, there is no right or wrong time to purchase key life insurance for men or women. A start-up may depend on one or two people who are critical to the success of the business, while a larger business may have more resources and the ability to replace key personnel with other employees. Legal and General Key Person Protection is a life insurance policy (with critical illness coverage, if selected) that is taken out to cover the life of a key person in your business.
The policy belongs to the employer and is paid by the employer, so any payment is payable to the employer. However, established businesses have higher overhead costs, so if the loss of a person affects sales, the consequences for the business could be severe. Every business is different, but strong employee insurance can provide a safety net for your business. With key person insurance, a company buys life insurance for its key employees, pays the premiums and is the beneficiary of the policy. In the event of death, the company receives the insurance benefit.