Key Person Insurance
Key Person Insurance
Key person insurance, commonly called key man or key employee insurance, is an insurance policy taken out by a business to protect the business from financial losses that would occur from the death or extended absence of an important member of the company. Key person Insurance policies are usually owned by the business and the business is the beneficiary under the policy. The purpose of the policy is to compensate the business for losses sustained with the loss of a key income generator and enable business continuity.
How does it work?
Many businesses have a key person or persons who may be responsible for the majority of profits, or has unique and hard to replace skills that are vital to the company. An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The business does this to offset costs, such as hiring temporary help or recruiting a successor, and losses, such as its ability to transact business until successors are trained, which the business is likely to suffer in the event of the loss of a key person. Should death or disability suddenly occur, key person insurance could be the difference between the company's downfall and its continued success.
There are four categories of loss for which key person insurance can provide compensation:
- Losses related to the extended period when a key person is unable to work.
- Insurance to protect profits.
- Insurance to protect shareholders or partnership interests.
- Insurance for anyone involved in guaranteeing business loans or banking facilities.
Contact us to discuss your options
Our knowledgeable and experienced agents at Boizelle Insurance Partnership can help you examine the many options for protecting your company against the loss of a key person. Contact us to discuss a policy that best suits your needs and protects your business. The cost of a key person insurance policy is usually quite small in relation to the benefit received when a key worker dies or becomes unable to work.