Employees are all attributable to the underlying success of a company. Different positions hold varying levels of responsibility and require specialist skills. Often, the continuity of a business or the direct profitability of the company will depend upon a select few key individuals. The consequences of the sudden loss of a key person will likely adversely impact not only the daily operation of your company but could also severely threaten the financial profitability as well.
Key persons can fall into numerous categories. The CEO of a company may be the only person who holds the strategic vision being implemented during a phase of rapid expansion or cost cutting and restructuring. A specialist IT engineer may hold the requisite knowledge needed to ensure business continuity should a fault occur in specialist equipment. A top salesperson may be responsible for a disproportionate level of the company’s revenue. The value of these key individuals needs to be protected, and can be done through keyman insurance.
Benefits of Key man insurance to the company
It protects the business against potential financial loss in the event that a key person with a special skillset or level of expertise passes away.
Business credit may be affected should the key man die, which can cause significant cash flow problems. Key man insurance can help as a guarantee for any loan repayment in the event of the insured’s death.
Insuring someone as a ‘key man’ can be good for morale. They will feel important and have an increased sense of belonging. This could lead to higher levels of productivity and may also help retain that important employee over the longer term.
If the company shares are publicly traded, it may help keep the share price stable in the event of the key man’s death. The key man insurance in place may provide comfort investors as they know the insurance proceeds can help minimise any disruptions to the company’s performance.
Implementing key man insurance is a straightforward process. It works much the same as term life insurance and is underwritten on a similar basis. Taking out cover sooner rather than later is important as premiums will rise as the key man ages. As an added incentive, the premiums can also be deducted as an expense from the company’s tax bill (providing certain conditions are met).
For honest, expert advice click here to speak to the Expat Insurance team today to protect your business’s future.
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