If you have just started a business and have a lot of work to do which may include getting the products ready for delivery, addressing a service query, hiring people to build a team, working on marketing strategies to increase sales, paying routine bills etc. These are visible stuff which seems to need urgent attention. With so much to do you hardly find time to pay some attention towards something that is of more importance, such as insurance – particularly the ‘key man’ insurance.
What is Keyman insurance?
It is the insurance brought on a particular person of a business team. If it is a small business, the key man or the person on whom the insurance is brought is the owner himself/herself. It can sometimes be a key employee on whom crucial decisions of the business are dependent or two of them who would maintain the major operations of the business. Key man insurance is needed on these people.
How does key man insurance work?
A business company determines the key person in their whole team and purchases a life insurance policy on that person, the company pays the premium and for this, the company is the beneficiary. If the key man or the person on whom the policy is brought dies suddenly, then the company will receive the insurance payoff. Such an insurance cover is important mostly for small businesses because the entire business will be dependent on the key person determined. The death of such a person causes immediate death of the company or bankruptcy. The idea of key man insurance is to help the company bear the losses occurred due to the key man’s death for which the beneficiary is the company and the pay off can be used to avoid financial instability. For instance, paying debts, distributing money to investors (if projects cannot be handled without the key person), pay severance to employees and shut down the business in an organized manner.
In case you are the only person in your company and there are no other employees who depend on the business then a key man insurance is not required. Here your family is not considered. Key man insurance cannot be confused with personal life insurance. Both are two different kinds of insurance. Even if you have spouse and children dependent on your income, key man insurance doesn’t apply to them. The purpose is totally different and it applies only to the business needs.
How to find the key man?
Take a closer look at your business and check out who is the most worthy member of your team. a person who cannot be replaced by someone else in a short while. Generally, in small companies, it is the founder or the owner who binds the operations such as maintaining documents, handling employees, main customers etc. If this person is no more than the business almost stops. Such a person can be pointed out as the key man on whom insurance policy should be purchased For every business to avoid disasters to business in the incident of his/her demise.
What is the amount of key man insurance required?
The amount you expect as payoff during a key man insurance claim depends on the business. Generally, you should buy what you can afford while considering the worth of the person on whom you are paying the premium. Get a few estimates from various insurance companies in the market and decide wisely. Know the terms of the insurance policy properly and avoid paying unnecessary commissions to insurance agents. Decide on how much is required to stabilize your business when the person is gone and then buy. Estimates from as low as $100,000 to $1 million can be taken and after a complete comparison between the various insurance providers, a policy that fits your needs and budget can be purchased. 55 Entrepreneurs Share Best Business Advice & Success Tips - RyRob.
A perfect key man insurance policy should be able to address cash needs in situations of tragedy as well as be inside your budget. The premiums should not burden the finances of the company. Even if you do not lose the person the insurance premiums should be just another routine payout without affecting major finances. It should not be a deciding factor amongst others. While young, most of us don’t think of dying and hence do not see the long term need of an insurance policy. But a tragedy is something really unfortunate and can have adverse effects on your business. So decide early, better during the start-up to invest in key man insurance so that it becomes a routine payment in your financial management.
It should not be a deciding factor amongst others. While young, most of us don’t think of dying and hence do not see the long term need of an insurance policy. Our expert panel consists of insurance providers from some of the most popular names and biggest brands in the country’s insurance market. A graphical comparison of the insurance cover levels and policy expenses for each requirement ensures that you buy the best policy. We are also here to help you identify the key man in your company on whom you should invest to buy the key man insurance policy. We provide a list of considerations to find out the right person in your team to be insured. This also helps you in managing funds without any hassles. A complete solution for protective and healthy operations of the business may it is big or small is our policy. We are technically accessible meaning every quote that you require is emailed to you and as many queries that you ask are happily answered. But a tragedy is something really unfortunate and can have adverse effects on your business.
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