An article that explains the need for Key Man/person insurance in a small or medium company and what this type of cover protects. If you are wondering what this type of cover is and if it will help you with your company please read on.
Key Man or Key Person Insurance – Do I need it?
As a small or medium business owner, there are many issues you will face and overcome each day in your business if you were to lose a key member of staff to a serious illness or even death?
Would your company be able to survive?
There is something you can do to protect your business from such an event and it is called Key Man or Key Person insurance. This article will explain this type of cover and help you to decide whether it is something that will benefit you and your business partners.
What is Key Man/Person insurance?
‘Key Man or Key Person insurance’ is the term used to denote a life cover policy taken out by a company on the life of one of its employees or directors.
Key Man insurance protects businesses against the financial loss it would incur from the death or extended incapacity of a key individual within the business, and in turn would ensure the continuity of the business.
Key Man insurance policies compensate with a fixed monetary sum as specified in the policy.
Why do I need Key Man/person insurance?
You need this type of cover if you are the owner or part owner of a company.
In many small, privately owned businesses it is the case that the owner or shareholders would have the greatest financial impact should something happen to them. Key Man or Key Person Insurance can protect your company from this. A good way to decide whether you should look into Key Man or Key Person insurance is to look firstly at your business. If you or one of your business partners were to die or become seriously incapacitated for an extended period of time, could your company continue to run and produce the same level of profits as it currently is? If the answer to this question is ‘NO’ then it is strongly recommended that you speak with a professional about the possibility of taking out a Key Man or Key Person Insurance.
Once a policy is set up and put in place you can work safe in the knowledge that should the unthinkable happen, your company can still continue to run and generate profits.
How do I decide who my Key People are?
A Key Person is anyone who would have an impact on the finance of the company should something happen to them. This person or people could be, directors, shareholders, managers or anyone who has a specific skill or knowledge which is especially important to the running and financial stability of the company.
Key Person insurance is designed to protect the net, pre-tax profits of small and medium companies in the event of loss or serious illness of one of its Key People.
It is really important to speak with a professional about your company and its need for Key Person Insurance as there are many companies who do not realise this kind of cover exists.