Key Person Insurance
What Is Key Person Insurance?
As a company owner you are very aware that running a successful business means having a great team behind you. In many cases there might be one person who stands out as being critical to the company’s overall success. This person is deemed to be invaluable to the company based on their knowledge and contribution.
How Would Your Company Cope If That Person were to Die Prematurely, Or Become Sick And Unable To Work?
Key Person Insurance will protect your business if such unfortunate things happen. Keyman or keyperson insurance is basically insurance taken out by an employer in his/her own favour against the injury, sickness or death of an employee (the keyperon) whose services are crucial to the success of the company.
Who Owns A Key Person Life Insurance Policy?
The business owns the policy & pays the premiums. If a key person dies, the benefit is then paid to the business. The money is usually used to help a business regain lost revenue as they search for a replacement.
How Does Key Person Insurance Work?
You can take out Key Person Insurance any time. It doesn’t have to be when your company is set up initially. You will have to pay a regular premium based on the amount of cover you require. If the unexpected happens and the person who you are covering dies, or becomes seriously ill, the policy will pay out a lump sum. This can be used in a number of ways. It can offset any financial losses incurred. It can also be used to pay off bank loans where the key employee gave a personal guarantee, or to pay off loans made to the company by key employees.
What Are The Features Of Key Person Insurance?
Protection: If a key employee dies prematurely, a lump sum is paid to help maintain the business.
Continuity: Can help minimise interruption to the business while a replacement is sought.
Financial Aid: Can help pay off bank loans that involved the key person.
Staff: Can help provide resources to find a replacement for the employee.
Who is Key Person Insurance For?
Key person insurance is taken out by a company of any size, where a need has been identified to protect against the loss of a valued employee. This employee is usually of high financial or strategic importance to the company.
Why Should I Take Out Key Person Insurance?
This type of life insurance gives additional security to your business, as it protects against the loss of a key employee. As a company owner, it can give you peace of mind knowing that you are protected from the financial implications of the death or incapacity of a vital member of your staff. You should always speak to a qualified financial advisor before buying this or any type of insurance to ensure that the product is suitable for your needs.
