How Does Key Man Insurance Work?
Key man insurance is a type of life insurance or disability insurance that protects your business in the event of the death or disability of a key employee.
What is a Key Employee?
A key employee is an employee who has a significant impact on the success of your business. This could be a C-suite executive, a top salesperson, or a skilled technician. The loss of a key employee could have a devastating impact on your business, so it’s important to have a plan in place to protect yourself.
How Does Key Man Insurance Work?
Key man insurance pays out a death benefit or disability benefit if the insured employee dies or becomes disabled. The death benefit can be used to cover the cost of replacing the employee, while the disability benefit can be used to cover the employee’s salary and benefits while they are unable to work.
The amount of coverage that you need will depend on a number of factors, including the employee’s salary, the impact of their absence on your business, and the length of time that you expect to be without their services.
Benefits of Key Man Insurance
There are a number of benefits to having key man insurance, including:
- Protects your business from financial loss
- Provides peace of mind
- Helps you attract and retain key employees
- Can be used to fund a buy-sell agreement
Who Needs Key Man Insurance?
Any business that relies on a few key employees should consider having key man insurance. This is especially important for businesses that are in high-growth mode or that are heavily dependent on a particular employee’s expertise.
How to Get Key Man Insurance
You can purchase key man insurance through a life insurance company or a disability insurance company. The cost of your policy will depend on a number of factors, including the employee’s age, health, and occupation.
If you’re not sure whether or not you need key man insurance, talk to your insurance agent. They can help you assess your risk and determine if this type of insurance is right for you.
Conclusion
Key man insurance is an important tool that can protect your business from the financial impact of the loss of a key employee. If you have any key employees, you should consider purchasing this type of insurance.
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