Anyone who doesn’t have insurance is begging for trouble. According to Murphy’s Law, “Anything that can go wrong, will go wrong.” The unspoken corollary is that it will happen at the worst possible moment. Call it the perversity of the universe if you like, but anyone over the age of 30 has seen this unyielding law of nature in operation, probably on more than one occasion.
Life insurance has been around since the early 1700s. Since then it has grown into a worldwide, multi-billion dollar industry. Different types of policies have proliferated over the years; Term, Permanent, Whole Life, Universal, and so on. But what about life insurance for key personnel at your business whose unexpected death or illness, say, from stress, would bury your company in a hole it could never dig itself out from? What kind of life insurance can you get for them? Can you get life insurance for them?
As a matter of fact, you can. It’s called key man insurance.
Key man insurance is a way for a company to protect itself against the sudden, unexpected death of key personnel such as executive officers, employees with specialized one-of-a-kind skills, or unusually effective members of the staff who do the work of five or six people. If people like that die or fall critically ill without warning, a great deal of the business would die with them. It could take months to rebuild or regain what was lost when they died. In the meantime, the entire business could go under due to negative cash flow.
The key man insurance is a life insurance policy taken out by the company on those key employees that pays the benefits to the company in the event of the employee’s death. The company is both the policyholder and the beneficiary. This will protect the company’s cash flow during the period when it is recovering from the loss of the employee.
You can learn more details on these policies at MyKeyManInsurance.com.
Large companies have duplicate personnel in every area of the corporation. Policies and procedures are written down and widely disseminated, financial accountability and banking activities are shared between multiple people, and research is built on teams of scientists, engineers, and researchers rather than just one person. Consequently, large companies rarely have any need for such insurance policies. They’d be wasting their money on them.
Small companies are different. The smaller they are, the larger the role played by each person. If one of them dies or comes down with a critical illness (heart attack, stroke, etc.) that incapacitates them for an extended period of time, the entire business could flounder and go down the tubes.
As Brexit uncertainty continues, the construction sector is contracting and shrinking. As firms downsize, employees are laid off and job duties and departments are consolidated to save money. The faster the downsizing takes places, the faster and further the consolidation will go as well. Sometimes it can get out of hand and before you know it, one person has suddenly become the hub around which the entire business revolves. No one planned it, it just happened.
Once that situation has developed it can be very difficult to correct, especially if the contraction is still ongoing. In a situation like that, even a good-sized company could find itself vulnerable to losing one or two key people. They need key man insurance on those individuals, at least until the economic situation stabilizes and turns around.
It depends on what the policy is being used to cover, but in most cases, yes.
It depends on how long they will be with your company and how long they will continue to be a central component of your company’s viability. If your company expands and diversifies duties and responsibilities, their death or illness may no longer be fatal for the company.
If a key person dies or becomes critically ill, the benefit can be paid as a lump sum or over a period of time.
Like any insurance policy, there are a number of variables that should be discussed with your insurance agent. They’ll be able to answer all your questions and provide the details you need in order to make an informed decision about this form of insurance.
