Last week, I spoke about the importance of personal cover, be it life cover, serious illness cover or income protection cover. Having such plans in place can alleviate the stress of what would be a very tough time in any one’s life or for those left behind.
For the next couple of weeks, I want to touch on Business Protection which is equally as important if you have your own business. In particular this week, I would like to focus on Key Person Business Insurance.
What exactly is Key Person Insurance?
This is a business-specific life insurance that can compensate a company for the financial loss and other consequences of the death of an extremely valued employee of high financial or strategic importance to the business.
Should you have a key person in your business, on which the business ultimately relies, and the loss of such a key person would be detrimental to the business, then you can opt to cover that person for a set amount of life cover and/or serious illness cover.
Key Person insurance can be taken out at any time of the company’s lifetime. Once the sum assured is set, a premium for that cover is paid regularly once the policy is incepted. If the keyperson becomes seriously ill, the policy will provide a lump sum to compensate the company for that event and the funds received will be used by the company to offset any financial losses incurred. It can also be used to contribute to bank loans, where the key employee gave a personal guarantee or to pay off loans made to the company by the key employee.
Ultimately in the event of the inability of the key person to do his/her job due to serious illness or in the event of their untimely death, such cover should allow a company to continue with minimum disruption to the business as the cover paid to the company will help to maintain the business in an uncertain change over period. It should help provide resources to find a suitable replacement for that employee.
As an Employer, it can bring peace of mind in the knowledge that you are protected from the financial fall-out due from the death or incapacity of an important member of your team.
If you feel your business is vulnerable and you want to assess this as an option to safeguard your business do give us a call.
Next week I will be focusing on other ways to safeguard your business namely Co-Director Insurance or Corporate Co-Director Insurance and Partnership Cover.
