04 Jan Key Man Insurance or Key Person Insurance – explained
A company is only as good as its employees. It’s the people who make the company and it’s extremely important that the organisation look after their personnel.
They bring that something extra to the table and become an integral part of the company. They are known as the key persons in a company and you can protect your human capital with the help of key man insurance. Key man insurance is designed to pay out an agreed cash sum if a key employee suddenly stops work due to death, total disability and or a critical illness.
Here are few details about key man insurance.
The specified key man can be any person in the organisation. They must have a special skill set, be in charge of important things in the organisation. The key person work and participation should add to the profit of the company. In a nut shell, key man insurance for people with power and for people in power. Key man can be anyone from a director of a company, key sales representatives, finance directors, managers, research and development personnel etc.
Let’s now look at the advantages of key man insurance.
• To begin with this type of insurance helps the company deal with the loss of its key man. In most companies the person insured adds to the company profits. In case of emergency key man insurance acts like a stop gap arrangement and gives the company enough time to come with a plan of action without having to worry about financial losses to the company.
• With key man insurance the company remains unaffected to a certain limit. The benefit payout go’s towards funding loss of profits.
• With key man insurance the company can take care of recruitment. The first step would be hiring temporary staff for the role as well finding someone qualified and with the necessary skill set for a permanent position. Recruitment is not cheap but can be managed with key man insurance.
• Bank debt, loans and overdrafts can be taken care off with the sum insured. It takes a load of the company’s back and doesn’t hamper the company image or goodwill with investors and bankers.
• If the key man holds a substantial amount of shares in the company, then key man insurance helps the company to buy them back and keep them from getting into the wrong hands.
• Premium costs for key man insurance depend on the insurance provider and the work profile of the insured person. So get a quote from various companies before getting your insurance in place.
Also in todays world key man insurance is also reffred to as key person, given that the key individual may also be a woman!