Why Your Organisation Requires Key Man Insurance Coverage

You've finally taken the plunge and launched your own company; it's your pride and joy, the product of your ingenuity, and now you're drowning in paperwork and obligations.

You are currently working through the various stages of developing your business plan, managing your finances, obtaining any licences and permits that may be necessary, and ensuring that your company complies with local, state, and national business regulations.

You and your new employees are wearing yourselves and each other out because of how busy you are.

You adore it, and you simply cannot fathom having it any other way given how much you value it.

This company was once just a pipe dream for you, but now it's a functioning part of your life.

You have recently hired new employees who are counting on you and the company to be successful.

Your family, including your spouse, is also depending on you to provide for them.

In addition, you, along with the others, need to take precautions to ensure that things will continue to go smoothly in the years to come.

Definition of "Key Man" Insurance

So, at this point, you might be wondering, "What exactly is key man insurance?"

The term "key person insurance" refers to insurance that is taken out on the key people in a company, which could be as few as one or two individuals.

These are the individuals who are absolutely necessary to the continuation of the business, and if something were to happen to them, the company would most likely continue on its path toward failure.

According to business.com, the company is responsible for paying the premiums and, in most instances, also receives the benefits.

Although it is most commonly put toward covering costs until the company can find a suitable replacement and get back to business as usual, the money can also be put toward a variety of other purposes.

Once you have determined which key individuals require insurance, you can move forward with developing the insurance plan.

In addition, the length of time that these insurance policies typically cover can range anywhere from ten to twenty years, depending on the nature of the company being insured.

You are probably curious about how much money purchasing this kind of insurance will set you back right now, but the truth is that the prices will range quite a bit.

Each policy is truly quite unique and takes into consideration the age, health, and various other aspects of the key employee who is being insured.

When Analyzing Key Man Policies, What Factors Should Be Considered?

It is critical to make time for a conversation with an insurance advisor who is familiar with your company and has a solid grasp of your objectives.

It is essential, and I don't mean this as a pun in any way, to have a backup plan in place in the event that something were to happen to either you or the key people in your company.

When looking for the best insurance policy for our company, we posed a few questions to the professionals at mykeymaninsurance.com to get an idea of the kinds of things you should be thinking about.

Who among your staff members do you consider to be the most important?

These are the individuals who, in the event that they passed away, would cause immediate hardship for your company.

In most cases, companies will make certain that the following professionals are present:

The proprietor of the company.

Depending on the intellectual property that the owner has brought forward, the loss of this person due to death or serious injury could likely have a negative impact on the ability to secure financing, continue relationships with investors, or do other things.

A crucial or top salesperson, particularly if this individual is responsible for bringing in a disproportionately high percentage of the company's revenue.

Engineer or scientist in software development, or owner of significant intellectual property

Whoever was responsible for the creation of the intellectual property of the company is unquestionably an important person to protect.

Have you given any thought to the planning of the next generation?

Is this a business that you started with family members or did you partner up with a good friend or someone you worked with?

Who are you grooming to succeed you in the business in the event that something unfortunate happens to you?

What kind and how much coverage do you require?

According to the National Federation of Independent Businesses, the typical amount of coverage falls somewhere between $250,000 and $1 million. This information can be found in the business.com article that was mentioned earlier.

What Your Key Man Insurance Won't Protect You Against

This information will also be provided to you by your insurance agent; however, it is imperative that you go into the process with the awareness that the following categories of events are not covered by this type of insurance:

Fraud

Misrepresentation

Lie with the intent to deceive

Suicide (with contestability period)

There is a possibility that there are additional exceptions; therefore, it is imperative that you do your research.

Relationships with Investors

Aside from the intellectual property that is essential to the success of your company, the most important person at your company is typically the one who has secured financing and developed relationships with investors, as was mentioned previously. This is because intellectual property is so important to the success of a company.

Having said that, this is not a question that should be taken lightly at all.

If your company does not have an applicable key man insurance policy in place, the majority of the time, financial institutions will not provide credit or financing to your company.

Therefore, it's possible that this won't be an option at all; if that's the case, it's essential to go into it well-informed.

Before they will even consider providing you with funding, financial institutions want to make sure that your company has a solid foundation and will be around for a long time.

In the end, the purpose of key man insurance is to provide financial security for you, your family, and your employees in the event that something unforeseen occurs.

Even though no one wants to think about it, accidents like this do occur, and the people whose lives depend on you will be grateful to you for taking precautions to safeguard the future of your company, which is also your child and your brainchild.

No one ever wants to think about the possibility of something happening to them, but the unfortunate truth is that accidents do happen. That's why it's so important to have key man insurance in place - in case the unthinkable happens. Financial institutions want to make sure that your company has a solid foundation and will be around for a long time, and one way they do this is by requiring key man insurance before they'll provide you with funding. My Key Finance Ltd understands how important this type of coverage can be for business owners and we're here to help you get the protection you need. Contact us today to learn more about our policies and how we can help you safeguard the future of your company.