Owning a business and running it successfully is indeed a matter of great business strategy, patience, foresightedness and bravery of a businessman. But there comes a situation when the business suddenly comes on the verge of dissolution! The closure happens when the most important person (owner, for instance) dies suddenly in an accident/mishap.
Either the business faces tremendous pressure to pay out debts owned by the deceased or it is considered closed in want of a leader who would have led it successfully. The situation sounds terrible, not for the future of the business, but also the employees working for it.
This is where the key man insurance comes to play.
What is key man insurance?
The key man insurance is a kind of life insurance policy insuring a key person in a business. The reason such an insurance policy is purchased is to ensure that the business will be safeguarded by the magnitude of loss caused by sudden death or departure of the key member of the business/company. Therefore, this cover policy is what it takes to safeguard future of a company/business establishment from the woes caused by departure/death of one of its important members.
Relationship with your business:
The cover policy has a very important relationship with your business. For starter, it ensures financial safety of your business in case the insured person dies unexpectedly. In small business, usually CEO or founder is considered a key member whose forever absence would mean a great loss for the company. Essentially, if the person dies, the proceeds (income) received from the insurance company will be used to cover expenses or pay off debts owed to investors, employees and other liabilities. The proceeds, in such a tragic situation, mean highly useful and productive for the company.
Points to consider when buying key man insurance
• Do not buy the policy that doesn’t seem conducive to your needs financially. To state otherwise, buy as much as you can afford easily.
• There may be several agents walking around to offer you purchase the policy. Just get their insurance rates. Compare them to find which one sounds affordable to your needs (in terms of premium payouts).
• Ask for quotes on different policies with respective premium payouts and match their cost respectively.
• Now, calculate the amount of money your business would require for its survival unless replacement of a key person is done. The calculation will definitely give you idea to choose a kind of cover policy.
• If still not feeling confident to buy a cover policy, better consult one of the best life insurance companies online.
Hopefully, the write-up will serve your purpose to understand key man insurance and things to take care of when buying such a policy.