These days, there’s insurance for everything. You can get insurance on your house, your apartment, your car, and virtually everything else imaginable that has value. This is more or less common knowledge. What some people may not realize is that insurance isn’t just for individuals.
Indeed, small businesses can also benefit greatly from the right insurance coverage. Today, we’ll take a look at one of the most essential forms of business insurance, namely, key person insurance. It’s no exaggeration to say that key person coverage can legitimately save a small business from going under in some situations. Learn more about it here:
What Is Key Person Insurance?
Key person insurance (also known as key man insurance) is a life insurance policy that businesses can take out on essential staff members. Essentially, the business itself acts as the beneficiary of the policy.
So if a key person were to become disabled or die, they would then be entitled to the benefits. As a trade-off, the business also pays the insurance premiums and covers other costs of the policy.
What is a Key Person?
Interestingly, there is no legal definition of who can or can’t be considered a “key person” at a business. In general, though, key persons are employees who are indispensable to a business. They may provide a vital service that can’t be replaced.
Or they may be responsible for a huge portion of the company’s revenue. Or they may even hold administrative responsibilities. Typical key persons include top sales professionals, business executives, and CEOs.
Why is Key Person Insurance Important?
The unexpected loss of a key person can be devastating to a large company –– not to mention what such an event could do to a small business. (That goes double for companies in the midst of an economic recession!) Key person insurance, then, mitigates against the potential risk of losing a key person without warning.
Key person insurance policies usually provide compensation for the business, based on factors like the key person’s salary, their contribution to overall revenue, and the costs associated with finding a suitable replacement. (Note, it’s also possible to take out multiple key person insurance policies at one time.)
Securing Key Person Insurance
It’s imperative for business owners to secure key person insurance as soon as a need for it becomes evident. Without key person insurance, the very existence of their business could come into question. Thankfully, you can contact a company like Helm Financial for more information on the subject.