Key Person Coverage

Many small businesses rely on the individual employees for the special skills they bring to the business.  Without them the business will suffer a very negative impact.  You can help protect the business through a special type of coverage.

Key person insurance, also commonly called keyman insurance or key man insurance, is an important form of business insurance. There is no legal definition for "key person insurance". In general, it can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy. The policy’s term does not extend beyond the period of the key person’s usefulness to the business. The aim is to compensate the business for losses and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.

An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.

There are four categories of loss for which key person insurance can provide compensation:

Losses related to the extended period when a key person is unable to work, to provide temporary personnel and, if necessary to finance the recruitment and training of a replacement.

Insurance to protect profits. For example, offsetting lost income from lost sales, losses resulting from the delay or cancellation of any business project that the key person was involved in, loss of opportunity to expand, loss of specialized skills or knowledge.

Insurance to protect shareholders or partnership interests. Typically this is insurance to enable shareholdings or partnership interests to be purchased by existing shareholders or partners.

Insurance for anyone involved in guaranteeing business loans or banking facilities. The value of insurance coverage is arranged to equal the value of the guarantee.

When considering your needs for insurance products for your home or business consider contacting Bennett Insurance Group at 623-979-4140

Brought to you by:
Jim Bennett
Bennett Insurance Group
623-979-4140
http://jimbennettinsurance.com
jim @jimbennettinsurance.com