What is key man insurance, and does
my new business need it?
When working hard at getting your business profitable
there are many things on your plate such working on the urgent
stuff--trying to get your product or service ready, figuring
out how to increase sales, paying the bills and so on. It's
hard to find the time to consider something that isn't really
urgent but that can be incredibly important, such as insurance--specifically,
"key man" insurance.
Key man insurance is simply life insurance
on the key person in your business. This is usually the owner,
the founders or even key employees. These are the people who
are crucial to a business--the ones whose absence would sink
the company. You need key man insurance on those people!
Here's how key man insurance works:
A company purchases a life insurance policy
on the key employee, pays the premiums and is the beneficiary
of the policy. If that person unexpectedly dies, the company
receives the insurance payoff.
The company can then use the money to pay of any debts, distribute
money to investors, buy back shares, pay severance to employees,
In a tragic situation, key man insurance gives the company some
options other than immediate bankruptcy.
*If the company is just you and doesn't have any employees or
other people who depend on it, then key man insurance isn't
as necessary.
How do you determine who needs this insurance?
Look at your business and think about who is irreplaceable in
the short term. In many small businesses it is the founder who
holds the company together--he may keep the books, manage the
employees, handle the key customers and so on. If that person
is gone, the business pretty much stops.
How much key man insurance do you need?
That depends on your business, but in general you should get
as much as you can afford. Think of how much money your business
would need to survive until it could replace that key person.
>>Click
here to get a Keyman Insurance Quote<<
Need more help? Why not give us a call,
or click here to contact
us via our online form.
