Business Insurance Key Person Insurance For Small Businesses
Anytime a business suffers a loss due to death or disability of an owner, partner, or key person in the company, it can be a difficult time for everyone. When that person is instrumental to the operation and sales of the business, it can have a detrimental effect on your business, revenue and ability to stay open.
There are many costs to a business when they deal with a loss of a key person. With the right insurance and planning, you can save time and money keeping your business on track.
Businesses that rely on a few talented employees for success should consider key person insurance. It can help protect any business and its shareholders or partners. It’s especially important for small- to medium-sized businesses, as the loss of a main person’s production can have a negative financial effect on the whole business more than a much larger company.
What Is Key Person Insurance?
Key person insurance is a life or disability insurance policy taken out by the business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business. It is commonly needed with buy/sell agreements, debt protection and revenue protection.
How Key Person Insurance Can Help Your Business
This insurance protects a business form loss related to the extended period when a key person is unable to work to provide temporary personnel and, if necessary, to finance the recruitment and training of a replacement.
This is also insurance to protect profits, offsetting the lost income from lost sales, losses resulting from the delay or cancellation of any business project that the key person was involved in, loss of opportunity to expand, or loss of specialized skills or knowledge. It protects shareholders or partnership interests.
Typically, this is insurance to enable shareholders or partnerships interest to be purchased by existing shareholders or partners. It is insurance for anyone involved in guaranteeing business loans or banking facilities. The value of insurance coverage is arranged to equal the value of the guarantee.
Who Does Key Person Insurance Cover?
Anyone can be covered. Any person who works for your business who, if removed, would cause a financial strain on the business can be insured. Usually, it covers owners, founders, and one or two key employees.
The Advantages Of Key Person Insurance
- Upon the death of a key person, the company is paid money to cope with the loss;
- It can help improve retention of important, talented employees;
- Taking out a key person policy on your top employees affirms their value to your business, strengthening the relationship;
- Coverage is a business asset that enhances your company’s creditworthiness for commercial borrowing;
- Assurance of business continuity for your executives, customers and creditors;
- The policy’s cash value may be available to your business through a withdrawal or loan if needed for business opportunities or retirement benefits.
Get A Free Insurance Quote
Contact our team for a free quote custom to your company's needs.