Almost any company can purchase key man insurance. This type of business insurance can cover employees that are aggressive profit earners or key employees in keeping the business running efficiently.
Key Man Life Insurance
A key man life insurance policy is one way that a company can protect itself in the event of the untimely death of a key employee, such as an executive, business owner, board member, or any other person that is vital in earning profits or maintaining the company.
This type of life insurance policy is bought and owned by the company, not the individual. If the insured individual unexpectedly passes away the company is the beneficiary of this policy. The company will use the payout to help secure their future without their key person–this could include finding a replacement for that position or compensating for any economical loss that may have occurred from the loss of one of their key employees.
Key Man Disability Insurance
Key man disability insurance is similar to key man life insurance, except that it provides protection to the company in the event that a key employee becomes disabled and can no longer perform their duties to the company. This policy will usually have either a monthly benefit or a onetime benefit. The monthly benefit will pay the company a set amount monthly for a certain amount of time, which can be anywhere from 6 to 24 months.
The onetime benefit will pay one lump sum. Generally, this type of benefit will not payout until one year has passed and the key employee still cannot perform their duties. These different types of key man insurance are usually sold as two different policies.
Who Is A Key Man?
A key man can be anyone that is important in the daily operations of your business. It could be a top salesman that brings in the majority of the profits, the owner of the business, a partner in the business, or anyone in management. If the loss of a person would cause your business to suffer an economic hardship, interruption, or failure, they are a key man in your business and should be insured. Not only is it important to determine the key employees in your business; you will have to assess their worth to the company to determine the correct amount of coverage.
The Cost of Key Man Insurance
The cost of this type of insurance can vary greatly. There are many things that must be taken into consideration, including the amount of coverage, the age of the employee, health of the employee, and business location.
This type of insurance can range in price from a few hundred dollars to a couple thousand dollars, depending on the amount of employees you would like covered and the type of coverage you want. As with any insurance shopping adventure, you should get more than one key man life insurance quote. This will help you get the best coverage for the lowest amount.
Guest post from Bailey Harris. Bailey enjoys writing about couponing. She also writes about business insurance quotes for BusinessInsurance.org.