As a business owner, you wouldn’t operate without insurance to protect your premises and vehicles, and products like professional indemnity insurance and public liability insurance to cover your business activities.
But what about you and the other key people who make your business work. Those that are pivotal to its continued success? Surely these people are just as important for your business as vehicles and premises, right?
While many people – especially parents – understand the importance of life insurance and value the protection that it can provide for their families should the worst happen, business owners have a tendency to overlook similar safeguards for their companies.
If you’re a business owner or senior leader, such as a director or chief officer, ask yourself, ‘How long would the business continue to operate if I was no longer around?’ If the answer is you don’t know or not very long, you should definitely consider key person insurance.
What denotes a key person?
A key person in a business is basically anyone whose skill, knowledge, experience, vision and leadership are crucial to the continued success of the company.
Examples of a key person include:
- Managing director
- Marketing manager
- Computer specialist
- Top salesperson
Basically any individual whose death or long-term absence would result in financial losses, severe reputational damage and/or the ultimate closure of the business.
How does key person insurance work?
Key person insurance is designed to safeguard a business should one of its key people die or become critically ill. The policy itself is owned and paid for by the business, which is one of the reasons why it pays out a lump sum to the company in the event of an insured key person dying or becoming critically ill.
The lump sum payout can be used to pay to replace the key individual, including training costs; provide ready cash to compensate for lost business; and/or mitigate loss of confidence from suppliers and customers. It can also help if the business encounters difficulties raising finance for new developments.
What if a key person leaves the business or retires?
If a key person was to leave the business or retire before the end of the policy, the business has a few options:
- Stop paying the premiums, which would trigger the policy to end
- Transfer the policy to the key person, which would see them taking over the ownership and payments
- Look to transfer the policy to another key person (subject to approval from the insurer)
With key person insurance in place, a business has the confidence of knowing that it is prepared for the future and safeguarded in the event that one of its key individuals dies or becomes critically ill.
Interested in finding out more about key person insurance? Contact us today and we’ll be happy to discuss how this important product can safeguard your business. Alternatively, get a free, no obligation quote.
Rebecca joined Premier Choice Healthcare in February 2019 as a dedicated consumer account manager and looks after the needs of our individual clients. Prior to this, she worked for AXA PPP Healthcare for eleven years where she was a SME Account Manager working with a portfolio of key intermediaries across the UK.