If you have ever asked yourself: “What is the purpose of key man insurance?”, read on to learn what this important form of business protection is all about.
Every business, regardless of industry or size, typically has one or several key members of staff who are crucially important to the success of a company. Such key staff members may include, for instance:
- Company owners, directors and/or shareholders
- Sales managers, individuals with specialist skills and/or technical experts
In a nutshell, key staff includes any employee without whose talents, special skills and/or experience the future of the company would be at risk.
Risks to Consider
Losing a key employee could have multiple consequences that could severely impact the running and future security of a company. If a key man is diagnosed with some type of critical illness or unexpectedly passes away, the loss of this person’s experience, leadership, knowledge and/or skills could immediately impact the business by reducing productivity, which will ultimately affect profitability.
Replacing this person with new staff – be it temporary or permanent – will invariably involve time-consuming, expensive recruitment and training efforts, and in addition, their loss may result in the company losing:
- Critical business contacts cultivated by this individual
- Important contracts this person maintained
- Customers/suppliers’ goodwill & confidence in the company
The company will also still have to repay any outstanding business obligations/loans (and, if the critically ill or deceased key man was a guarantor, may have to do so more or less immediately).
Taken out & paid for by employers and paid out in the form of a single lump sum when a key man develops a listed critical illness (which illnesses are included depends on the policy/insurer) or dies, the benefit of key man insurance can be used by the company to mitigate these consequences. It could be used, for instance, to:
- Repay outstanding loans/obligations
- Recruit & train replacement staff (temporary/permanent)
- Reduce the potential impact of any contract/trade losses
So, what is the Purpose of Key Man Insurance?
The purpose of key man insurance is therefore to protect a company against the loss of key staff members who make invaluable contributions to the smooth running, profitability and growth of the business.
To learn more about this vital form of business protection and/or receive expert advice on how to effectively – and adequately – protect your business, call our team on Tel.: 01279 315 013 now, or you can also email us at: firstname.lastname@example.org or contact us online today.