No matter the size of your business, key man insurance is something you need to consider. Even if you’ve recently started your business, it’s a key insurance for you.
What is key man insurance?
Key man insurance, also known as key person insurance, is an important form of business insurance.
It’s essentially an insurance policy which is taken out by a business to compensate that business for financial losses encountered by an important member of the team. These losses could be caused for that member having an incapacity to work through serious injury or even death.
What does the key man insurance cover?
A business cannot function without its staff, especially those crucial members of staff who have a great effect on the success and financial security of a company. It may be hard to define which members of staff come under this category, but it’s typically founders, directors or the top salesman.
How does key man insurance work?
Similar to life insurance, the insurance pays if that key person or group of people are unable to work for the foreseeable future. The pay-out is used to cover the costs finding a replacement.
An important employee that you deem eligible for key man insurance will have a calculated premium. This is based on age, health and lifestyle. It is however the business rather than the individual who pays the premiums. The business though is the key man insurance beneficiary and will receive any pay-out.
The price of the policy comes down to the length of the term of the insurance, as well as the level of cover – just like how insurances work.
When is key man insurance considered right for you and your business?
It’s considered right when you have an individual that the business would struggle to function without or would experience great financial loss if they were to stop working.
What key man insurance offers is the whole firm’s continuity. You are reliant on the skill and talent of individuals, so it’s only fair that you need cover should the worst happen. Staff are the greatest asset to a business and losing such a person could be damaging to the entire organisation, however big or small it may be.
Key man insurance will alleviate any uncertain periods culturally and financially.
Do you want to find out more?
If there are other questions that you have that this blog may not have answered, then please get in touch with our team today – they’re available and ready to help!