Posts Tagged ‘key man insurance’
Why Your Business Needs Key Man Insurance
Thursday, January 31st, 2008
Imagine if the Managing Director of your company suddenly developed a serious illness, or worse still, died suddenly. Or the CEO or founding partner was in the same situation. How would your company cope? Would you be able to continue trading easily, or would this impact heavily and adversely on your business as a whole? If it’s the latter, don’t worry - you’re not alone, and this is why insurance companies offer key man insurance cover.
What is Key Man Insurance?
Ideal for businesses both small and large, key man insurance offers invaluable financial cover for the employees that the name of the insurance infers - key personnel. These can include Directors, Partners, Senior Sales Managers and more - basically, anyone for whom losing them would have a serious impact on your ability to function as a business.
What it Covers
Because each business is different, there may be small but important allowances for your particular business, so you should make sure you know what exactly key man insurance will cover should you decide to have it. However, as a general rule, the cover includes:
* Insurance that will keep your company trading as normally as possible when you lose a key member of staff. This can include cover if you’re unable to train someone to take your key personnel’s role in the short term.
* Protection of business profits
* Protection for shareholders or partners in the business, since obviously this will affect them as well
* Payment protection if you have business loans or lines of credit, avoiding any late payment penalties or worse
Why you Need Key Man Insurance
If you’re a small one-man business, it’s quite probable that you don’t need key man insurance, and that you’d be better protected with other, more specific insurance that’s better suited to your company. However, if you have anyone else in your business that’s as key as you are in the success of it, then you definitely need this specialist insurance.
The best way to look at it is through how your business will be affected. For example, if you have numerous loans and lines of credit that only your senior accountant can handle, and they fall ill, payments may be missed. This in turn will lead to default charges and potential bad credit - potentially catastrophic in the business world.
Another example is if the sales director suddenly develops a long-term illness, or the main partner in the business dies - this can have a detrimental knock-on effect in how partners view the company’s ability to continue. They may call in loans or investments that they have provided, and this will lead to a serious financial problem. Again, key man insurance covers this and ensures any outstanding monies are paid, easing investors’ worries.
If you feel that your company would be hit hard by the potential loss of a key member of staff, make sure you look at what key man insurance can offer you. It can be a lot more than just peace of mind.
Tags: danny brown, insurance, insuring your business, key man insurance, small business insurance, tips
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