The ABC's Of Key Man Insurance

Why It's Needed for Your Business

 

Aside from the office building, the money invested on a business and the equipment used for its day-to-day operations, one of the most important assets of a company is the employees. When you ask about the success story of the bigwigs in the business industry today, you will find out that they all have a team of excellent individuals working hard to achieve the goals that the company has.

As a business owner, you should naturally make sure that your employees – one of your company's most important assets – have ample protection. This is exactly what the Keyman insurance is all about. Read on to find out what its definition is, and how this type of an insurance policy can serve to protect your business in general.

 

Frequently Answered Questions about Keyman Insurance

To give you an idea about the importance of Keyman insurance in a company's operations, here is a small collection of frequently answered questions about this type of an insurance policy:

1. What exactly is a Keyman insurance?
Basically, this is a type of an insurance policy which offers financial coverage in case a key employee in your company suffers from a long-term illness or death. The definition of a key employee or a key individual in the company's operation varies for each business.

It could be someone who is a major stockholder in the business, whose absence would lead to a major loss in the company's finances. Or, it could be someone in the regular payroll whose specialized skill or knowledge would have a negative impact on the company's profit should he or she be absent.

2. Who are the 'key individuals' who should be placed under the Keyman insurance plan?
There are actually a good number of employees who can be placed under this type of an insurance plan.  Consider everyone from the head of the company, working your way down the corporate ladder.

The key people could be those higher up's who drive the business and steer the company in the right direction. You should especially consider the people whose absence could cause your company to lose its sales and profits.

Directors, shareholders, partners, integral managers, key personnel in the Information Technology department or those who have a specialized knowledge in operating or repairing a special equipment or software that you need in production.

3. Should a Keyman insurance offer financial coverage for those who are guarantors on the loans placed under a company's name?
This is one of the most important things that you need to remember when getting this type of an insurance policy. For example, if there is a loan from a bank which is personally guaranteed by a particular board member or director, that person should be placed as a key individual under the Keyman insurance policy.

Knowing about the ins and outs of filing a Keyman insurance policy is a must if you want to have a well-rounded financial protection for your business. For this, knowing which individuals are the key to your business' operation is a must so that you won't have to take unnecessary risks.