Key-Person Insurance is life and/or disability insurance on the critical employees in your company. This could be business partners, executive officers or other key employees upon whom the success of the business depends. If your business isn’t protected, an unexpected injury, illness or death could torpedo the success you’ve worked so hard to achieve.
Key-person insurance can protect that success and help keep your doors open. Here are four ways key-person insurance can benefit your company and why you need it today.
Maintain Revenue During a Transition
If you are a small business and suddenly lose one of your key employees, it is likely that your productivity would suddenly slow, which means revenues are likely to drop as well. A key-person insurance policy can help ensure that sufficient funds are available to meet obligations and make up for the shortfall in revenue while you recover from that loss, and give you time to make wise, reasoned decisions about your next business steps.
Fund a Replacement
In many businesses, especially smaller businesses, there is often one person who is key to sales and customer-acquisition. If you were to suddenly lose this person, how would your business fare? How long would it take you to find a new employee who could perform at this same level and train them? Key-Person insurance can fund that recruitment effort and help pay the bills until your new employee is up to speed and producing.
In a partnership, if one of the partners dies, it is most often the family who will inherit their business interests. A key-person life insurance policy can provide the cash necessary to purchase the deceased partners interest in the business, or the funds to pay out any business obligations so that the surviving partners are not forced to liquidate the business or take on substantial debt to make those payments and keep their doors open.
Protect Your Assets & Repay Debts
Most businesses have some amount of debt, whether it is a mortgage on real estate, financed production equipment, or lines of credit that are necessary for day-to-day operations. Many times the key employee may be a critical part of the management team, responsible for sales, production or financial management, any of which may be of great concern to creditors. Key-person insurance demonstrates to creditors that you have the foresight to plan for eventualities and will have the means to repay obligations, so they do not have to worry about immediately collecting outstanding loans or reclaiming critical equipment. Some creditors will require evidence of key-person insurance as a condition of their contracts.
Have you protected your business, your assets and your employees? Key-person insurance is a vital component of any successful business plan. For help in setting up this critical protection, call Roper Insurance today. Our insurance experts can help you determine which employees should be protected, and help you calculate the right amount of insurance for each covered employee.