While most business owners are aware of the importance of having life insurance, many fail to recognise the necessity for business life cover to include keyman protection. Here is why this is a mistake any company with employees vital to their business’ success should not make.
What is a Keyman?
Before discussing the importance to include keyman, or key person, protection in your business life cover policies, let’s take a brief look at what a key person is…
As the above paragraph suggests, a keyman is a person who is of vital importance to the smooth operation, profitability and future growth of a business.
Usually someone with unequalled experience, special skills/talents no-one else in the company has or someone acting as a guarantor for commercial debts (i.e. business development loans, overdraft facilities, commercial mortgages, other types of asset finance), your company’s key people could, for example, be:
- You (the company’s owner), your partner/s or shareholder/s
- Director/s, sales, floor or marketing managers
- Designers or technical specialists with unique qualifications/talents
- Any of your employees with outstanding experience, skills, knowledge or talents
Let’s move on to examine what losing such an important person could mean to your business…
How Losing a Keyman Could Affect Your Business
Should one of your key staff members suddenly develop a critical illness or die, the loss of this individual could result in your company experiencing a reduction in productivity, which would ultimately obviously reduce its profitability. You may also end up losing:
- Crucially important contacts or contracts associated with/maintained by this person
- Suppliers/customers’ goodwill & confidence/trust in your company
If any of your business’ outstanding liabilities (loans, etc.) were secured against the deceased, you may also be required to repay these liabilities immediately. Unless your company has the necessary resources to do so immediately, this could put significant financial pressure onto your business.
In addition, your company will also have to recruit and train a replacement (temporary, permanent or both) for this lost staff member, which could incur considerable expenses at a time when your business may already be suffering financial difficulties due to this individua’s loss.
The Necessity for Business Life Cover to Include Keyman Insurance
In other words, losing a key staff member may not only present your business with substantial financial difficulties but may threaten its very ability to continue trading. Protecting your business against the effects of such a loss by including key man protection in your business life cover is therefore imperative.
How Does Keyman Protection Work?
Taken out by companies to mitigate the effects of losing a key member of staff, key man insurance policies pay out a pre-determined amount of money in the event of an insured key person’s critical illness diagnosis (if relevant cover is added to the policy) or death.
Companies can use this vital injection of cash to:
- Mitigate financial losses due to the named individual’s illness/death
- Repay outstanding business loans, etc.
- Purchase shares of the deceased person’s next of kin
- Cover the cost of replacement staff recruitment/training
Arranging the perfect policy to adequately protect your business’ financial future and ability to trade while keeping premiums affordable can be complex, so expert advice and assistance are a must.
Get in Touch
Boasting extensive experience, in-depth key man insurance know-how and access to renowned insurance providers most reliable and competitively priced policies, Spectrum FA understand that every business’ requirements are different.
Offering completely bespoke services, we therefore carefully and thoroughly asses your specific circumstances before recommending and arranging the most suitable, most competitively priced policies for you. Call us today to learn more/make an appointment for your free & no-obligation review: 01279 315 013.