Following on from last month, this article is aimed once again at business owners. As an employer, you know that running a great business means having a team of great people, but there may be one person who stands out as being a key player or central in the company's success. This person's knowledge, work, or overall contribution is considered uniquely valuable to the company. How would your business cope if that person were to pass away, or become seriously ill?
What is Key Person Insurance?
This is a business-specific life insurance (also known as Business Protection) which can compensate a company for the financial loss and other consequences of the death or serious illness diagnosis of an important member of the business.
How does it work?
You can take out Key Person Insurance at any stage of your company's lifetime. You will pay a premium on a regular basis, based on the cover that is required. If the unexpected happens and this person dies, or becomes seriously ill, the policy will provide a lump sum to compensate for this event. This can be used to offset any financial losses incurred. It can also be used to contribute to bank loans where the key employee gave a personal guarantee, or to pay off loans made to the company by the key employees.
· Protection: If a key employee dies, a cash sum is paid to help maintain the business.
· Continuity: Can help minimise interruption to business activity.
· Financial assistance: Can help with bank loans that involved the key person.
· Staffing: Can help provide resources to find a suitable replacement for the employee.
Who is Key Person Insurance for?
This kind of life insurance can be taken out by a company of any size, where there is a need to protect against the loss of an extremely valued employee of high financial or strategic importance to the business. Deciding on the sum of money to insure the key person is dependent on the company and the reason for insuring that individual.
Why take out Key Person Insurance?
Availing of this kind of life insurance can give additional security to your business, as it safeguards against the loss of a key employee. As an employer, it can bring you peace of mind in the knowledge that you are protected from the financial fall-out due from the death or incapacity of a very important member of your staff.