Can Key Man Insurance Protect My Business Profits?
When considering different types of business protection insurance, many company owners ask: “Can key man insurance protect my business profits?” The answer to this question is yes, it can – and here is how.
Key Personnel and the Effects of Losing a Key Man
To answer the question if and how key man insurance can protect your business profits, it is best to first look at what a key man is and how losing such a person could potentially affect your business, its smooth running, profitability and potential for growth…
So, what is a key man? Basically, a key man (or indeed woman) is any individual whose unique talents/skills, leadership, technical, sales or management expertise or experience are of crucial importance to the way your business operates, its profitability, financial security and growth. Such individuals could, for example, be:
- Business owners, directors, or partners
- Shareholders, managers or designers
- Marketing, technical or sales experts
- Any other members of your staff who possess unique talents, experience or skills
- Anyone acting as a guarantor for your company’s outstanding business liabilities (i.e. anyone with development loans, asset finance, commercial mortgage/s or overdraft facilities secured against them)
Losing such an important member of staff could have profound effects on your business’ productivity, profitability and future growth, security and success, including:
- Reduced productivity, which will ultimately result in reduced profitability.
- Loss of any vital business contacts associated predominantly with and/or contracts developed and maintained by the deceased staff member.
- Loss of the goodwill, confidence and trust suppliers and customers have in your company.
Your company will also have to advertise for, recruit and, of course, train someone to replace the lost individual, which will invariably involve a great deal of time and expense. To make matters worse, if the deceased was a business liability guarantor, you may also be asked to repay any outstanding debts secured against them.
If your company does not have readily available access to the funds necessary for this, your business could face substantial additional financial pressure at an already somewhat uncertain and difficult time for all concerned.
So, How Can Key Man Insurance Protect My Business Profits?
Taken out by you, the company owner/employer (who will be responsible for the payment of premiums), a key man policy will pay out a lump sum to you (your business) in the event of one of the insured key individuals passing away unexpectedly or, if you have chosen to add critical illness cover, being diagnosed with a specified illness.
This lump sum is then at your disposal to mitigate the financial impact this individual’s death/illness has on your business, which, of course, serves to protect your ability to continue trading and consequently your profits.
Get in Touch
For more detailed information on key man protection insurance, please contact us now to speak to an advisor and arrange for a free, no-obligation review of your specific requirements.