Key Man Insurance FAQs
The loss of a top manager or key executive due to a disabling injury or death would have devastating effects on most companies. Key man insurance allows businesses to plan for these unforeseen events and be prepared should disability or death strike.
- What is Key Man Insurance?
- Keyman “AKA” Key Person Defined
- Who Needs Key Man (Key Person) Insurance?
- Why Buy Key Person Insurance?
- How Much Key Person Life Insurance is Needed?
- Protecting Your Key Employees
- Keyman Insurance Categories
Key man insurance, a.k.a. key person insurance or key employee insurance is coverage that will protect the company or business in the case of an untimely death or disability of a top salesperson, executive or business owner. Key man insurance provides peace of mind to business owners and shareholders alike knowing that the business can continue operations without major disruption in the event of the loss of a key employee.
Key employees are those people who are critical to the success and profitability of the business. These individuals may be business owners, partners or executives that have a direct impact on company earnings or whose skills, talents and expertise are crucial to the continued growth of the organization.
Key person insurance is needed by a wide range of companies and for many reasons but generally is most important for small and medium size businesses. These companies depend on the expertise and talents of a small number of individuals for their success. The death or disability of one of these key employees or executives may well result in the demise of the firm.
Business Owners and corporations buy key man insurance to protect their company from the potential issues that may arise from the death or disability of a key person. Building a successful business takes many years and considerable effort and to lose years of hard work and substantial investment for failing to plan is not a sound business practice.
In many cases it is hard to put an exact monetary value on how important a key person is to a given business. Most of the requests we receive are based on the amount of funds being borrowed by the company via loan or some other arbitrary amount that was determined by an investor. This may not be the best way to determine you need for key employee insurance.
As a business owner, chief financial officer or board member, you have a responsibility to your company to make sure that business risk is minimized. Key employee insurance is a cost effective way to eliminate the unnecessary business risk associated with the disability or death of a critical contributor to your organization. But what if a key employee decides to leave your company to start their own business or even worse takes a position with a major competitor?
Businesses desiring to minimize risk and prevent the potentially devastating effects of the death or disability of a top employee or executive should own key man insurance. Other reasons businesses should consider key person insurance include succession planning for business owners as well as benefit planning for key employees.