Key Person Life & Health Insurance

Key person protection employs life and Health insurance policies to safeguard your business against the financial ramifications of unforeseen circumstances such as the death, illness, or disability of a crucial individual within your organization. This coverage acts as a safety net in the event of the sudden and permanent or temporary loss of a key individual whose absence would significantly disrupt the company's operations. It is a policy acquired by a company on the life or health of an owner or another individual deemed vital to the business.

Why the need for Key person Insurance?

Key person insurance offers multiple benefits for companies and their owners. It provides a buffer against various risks, providing cash flow resources to implement alternative strategies and ensure business continuity. 

Strategies for using Key person insurance can include. 

• Finding replacements -costs associated with replacing the individual, including recruitment, training, and potential revenue loss during the transition period.
• Safeguards shareholders' or partners' interests by enabling them to purchase the financial stake of a deceased or no longer able individual (using Buy-sell agreements)
• Profit loss due to sales or project delays. 
• Extends coverage to those guaranteeing business loans or banking facilities, aligning the insurance value with the guarantee's worth. 
• Overhead expenses 

Determining the necessity type and amount for such coverage involves assessing who holds irreplaceable roles in the short or long term. Assessing the monetary value of the key person, considering factors such as associated revenues/profits.

In many small businesses, this often pertains to the owner who fulfills multiple critical functions such as accounting, personnel management, and client relations. Without this individual, the business may face significant disruptions.