Running a successful business involves input from a number of people, some of whom may have roles critical to the functioning of the company.
Designed to help a business keep going after the untimely loss of any key employees, this insurance policy can make the difference between your company recovering and moving forward or facing business loss and potential closure without the services of these key employees.
What Is Key Person Business Insurance?
Key person business insurance is a life insurance policy that business owners take out to pay a benefit upon the death of any key employee working for the company.
These policies are usually taken on employees who have critical roles within the company such that without their presence, the business would fail to function.
Although this is a life insurance policy, it’s important to note that key person business insurance coverage is not a personal life policy, so it does not work the same way as a normal personal life insurance policy.
In this case, the benefactor is your business and benefits are paid to provide you with the funding needed to replace a key employee with someone who can fill in and keep things running.
How Does Key Person Business Insurance Help Your Business?
Losing a key employee can be devastating to any business, both personally and financially.
Not only have you lost a friend and member of your staff, you’ve lost that person's knowledge, experience, and ability to fill the role they play in the company.
In some cases, the loss of key personnel can bring a business to a standstill, leaving owners wondering how to move on and do the job that the deceased employee was performing.
The reason to purchase this type of business policy is to provide your company with the money needed to quickly replace that person and have the funding needed in case any problems arise after this abrupt change takes place.
It allows a business to find and train a new employee to replace the deceased, hire additional employees to keep the wheels moving, or pay for whatever is quickly needed to keep your business operating and resume its normal function.
In a worst-case scenario, it can be used to pay off business debt encountered due to abrupt changes or even pay off investors as well as provide severance pay to employees if it becomes necessary to close the business.
Does Your Company Need Key Person Business Insurance?
If your company is a sole proprietorship, key person business insurance is not necessary since your business must close if you pass away.
If you are a partner, this policy could give the surviving partner a way to buy the partnership if one of you dies.
Beyond the partnership, this type of policy protects a company if there are key employees other than yourself whose absence could cause the business to shut down.
If you have any such employees, key person business insurance coverage may be a wise investment for your company.
Protect Your Company with Key Person Insurance
A great team of employees can make your company profitable; however, if you have key individuals on staff who are essential to your company’s sucess, a key person business life insurance policy is recommended.
In the event of the unexpected loss of your star employee, this insurance coverage can help you keep things going until you find the perfect replacement who can follow in your former employee’s footsteps!