First in Protecting, Your Officers.
We all have a boss or coworker who our company wouldn’t be the same without. Not only would the company not be the same, but it might not even function at all. From the CEO to the accountants, from the small business owner to a talented manager, there are people who are more important to a company than anyone realizes.
What would happen if your company lost these key people because of injury, disability, or death? Would the company fold, or would there be a transition that would save the company and the employees still working there? Investing in key person life insurance, also called key man insurance, could help your company if a key person or key people were suddenly unable to continue to work.
If you are part of a small business that revolves around an owner or creator, you may want to invest in key person insurance. If you are part of a larger company or one that has diversified into different fields, key person insurance could ensure that every person and venture is protected in case of an unexpected event. For example, banks have key people who are important not only because of their position but also because of their experience in the industry. If your business has diversified into many fields, like media or entertainment companies, you may also need key man insurance, as a key person is integral to the continued success of your business.
Who Does Key Person Insurance Protect?
In your business, whether it be small or large, key people keep things functioning smoothly, and your company needs to be protected from the consequences of losing them. Key person insurance covers a specific person in your company, like the owner or CEO. For small businesses, the key person may be the owner, since they keep everything running and may have started the business themselves. Key people in any business or industry are those who are crucial to the company: people who your business would not function properly without.
Your company needs key person insurance in the event that person dies suddenly or is incapacitated and unable to do their job. A key man policy can be:
- A standard life insurance policy, which covers a person if they die during the time period specified in their insurance policy.
- Total and permanent disability insurance (TPD insurance), which covers disabilities or injuries that may occur to an individual.
- Trauma insurance, which also covers injuries or disabilities that may occur because of an unexpected accident.
Key person insurance policies cover the untimely death, disability or sudden departure of a key person, but they can also provide financial support while the person is recovering from an illness or injury and is unable to work in their previous capacity. The policy term is for the specified time period or until the person being insured is no longer with the company in the capacity of a key person.
It can be difficult to put a monetary value on a person and the work they do for your company, so these policies are often for a specific monetary value that is agreed upon in advance when the policy is purchased.