As a company owner, you have probably been told that keyman insurance is an important element of business protection – but what is a keyman policy and what does it do? Read on to find out…
First Things First…
Let’s begin by looking at the basics – namely what a keyman, or key employee, is. As the term suggests, a key employee is an individual whose experience, skills and/or talents (i.e. technical expertise, design flair, exceptional leadership or sales skills, etc.) are of vital importance (‘the key’) to the effective running and growth of a business.
In other words, a keyman is a person who makes an invaluable contribution to a business’ long-term profitability and success. This could, for example, be:
- Business owners, shareholders and/or managing directors
- Technical experts, sales managers and/or any employee/s with specialist skills
Losing a keyman due to critical illness or unexpected death could have multiple consequences with the potential to jeopardise the company’s financial future.
Potential Consequences of Losing a Key Employee
To start with, the loss of a keyman could immediately cause a reduction in a business’ productivity and subsequently profits. Then, of course, there is the need to recruit and train replacement personnel, which can be both time consuming and extremely expensive.
The critical illness or death of a key individual could also result in the loss of:
- Pivotal business contacts associated with this individual
- Contracts maintained by this person
- Goodwill & confidence of suppliers and/or customers in the business
In addition, if a key employee develops a critical illness or dies, any outstanding business obligations/loans must still be paid off.
So, what is a keyman policy and what does it do?
A keyman policy is a life insurance policy with/without a critical illness add-on (although critical illness policies can also be taken out on their own). It is taken out by employers to protect their companies against the loss of a key employee.
Premiums are paid by the company and in the event of such an individual developing a critical illness or unexpectedly passing away, the benefit (insured amount) of the policy is paid out to the company.
Paid out as a single lump sum, this benefit may then be used at the company’s discretion to mitigate this loss’ financial impact. It may, for example, help to:
- Recruit & train temporary/permanent replacement staff
- Reduce any losses due to losing valuable contacts and/or trade/contracts
- Pay off business loans/obligations
Get in Touch
To learn more about keyman insurance and discuss your best options in terms of cover amounts, what illnesses to include (if choosing to add on critical illness cover) and more, please call us on 01279 315 013 today. You can also email us at: firstname.lastname@example.org or contact us online today.