All companies, large or small, may need key-person insurance. If you start with a small business, your focus is likely to be on pressing issues, such as getting your product or service, hiring the right people, managing your expenses and paying the bills. Buying key-person insurance may not be the most urgent item on your agenda, but it can help save your business from bankruptcy if you face certain tragic situations.
How do I know if my company needs key person insurance?
Regardless of the size of your business, you may need key person insurance if the success of your business depends on a few key people. Your company may need key person coverage on the founders, owners, individual key individuals, or any person who is critical to the success of the company. Banks and lenders for small business management may require key person insurance as a condition of a loan. This coverage may also be required for mergers and other transactions.
If you or any other person can be reimbursed for your business in the short term, key person insurance can be a wise choice. This type of policy should be purchased for all people whose knowledge, skills or connections are so necessary that their absence would have a significant effect on or even decrease the business. Key person insurance can be crucial to protecting your company's future, whether small, medium or large.
How does key-person insurance work?
Key person insurance should not be confused with personal life insurance. It does not pay benefits to the deceased's family. The company buys life insurance for a key person. The company is the policyholder and beneficiary in the event of the death or disability of a key person. This insurance is designed to help the company survive the loss of a key person who is critical to its success until a compensation can be found to take over this information. If necessary, the proceeds can be used to settle debts, pay severance pay and distribute money to investors. It provides an alternative to bankruptcy after the loss of a key person.
How much key person insurance does my company need?
The size of the key person insurance you need depends on the type and size of your company and how crucial the key person is to its success. As a general rule, you should shop around for the best available prices and buy as much key-person insurance as your company can afford. Life insurance for life is available at lower premiums than whole or insured life insurance, making it a good choice for a key person's policy.
Compare the cost of insurance policies ranging from $ 1