Most companies believe that human resource is the best asset. However, how many companies out there protect human resource the way they should be doing. Key Man Insurance is about protection your key employees.
Specific instances or situations in which a company should consider Key Man may occur when:
1. The success or ongoing existence of a partnership is dependent on the abilities of one or more of the partners.
If one of the partners suddenly passed away, or became incapacitated and could not continue work, Key Man insurance would provide a financial cushion for the remaining partners, enabling the business to continue while new talent was recruited. Experienced insurance professionals agree that between the ages of 30-65 it is much more likely that a person will become disabled than die. For this reason, disability insurance should play a role in any Key Man insurance decisions.
2. The business needs to secure a loan.
When granting a loan to a small business, a lender will often require that one or more of the owners or employees take out life insurance and/or disability insurance protection, with the company or lender named as the beneficiary.
3. A salesperson generates a high percentage of total sales.
The insurance would cover lost sales revenue while the employee recovered from illness or accident, or in the case of death, until a new employee could be hired and trained.
4. The business merges with another company, goes public or enters any type of financial/operational arrangement with another company.
Key man policies is normally taken for Key executives for the company and it shall protect the company against potential financial loss due to sudden dismissal of the company best resource.
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