Many people don’t know much about key person insurance or how it might apply to their business. However, as a business owner it’s important that you take responsibility for the future of your company by looking into all the appropriate options. Key person insurance is a good option when you want to keep your company running smoothly if you lose an important person.
What is key person insurance?
Key person insurance is a form of life insurance for key people within the business. You could opt to have one or even a number of people covered. This cover is for people who are crucial to the business and whose absence could have serious ramifications on the company.
For a small business, this may just mean the owner or founders. However, there are a range of people key person insurance could apply to in a larger company. The cover provides financial protection to the company if a key person suffers a major illness, injury or death which allows the company time to consolidate and consider its options.
Why should I consider key person insurance?
There are a number of different types of situations where key person insurance may be appropriate.
- For specialised employees – While some employees would be easy to replace, specialised employees are a different matter. If you have an employee with a specialised skillset who has had many years to become proficient at their job, replacement and training could take some time and cost money.
- For investor confidence – If your company is continuing to grow and you are taking on investors, these investors may want proof that there is key person insurance in place so they are assured the company would survive if something were to happen to key people.
- For the top of the company – Key person insurance is most commonly used for executives and other senior company members who are instrumental in decision making. If something were to happen to these people, the company would need time to consider a replacement and keep the company afloat financially during an uncertain period.
- For skilled salespeople and big earners – A lot of companies have one or two people who stand out as exceptional salespeople or who consistently bring in a lot of business. If something were to suddenly happen to these people, the company may struggle with the sudden loss of revenue.
- For investors – If your company has one or two investors who are vital for the continuation of the company, key person insurance is a good option to ensure you’re financially protected if something were to happen to them.
To discuss key person insurance for your business, contact Elliott Insurance Brokers today on 1300 635 315 and we would be happy to discuss your situation.