Most organizations have certain individuals who are especially integral to regular options and ongoing success. These crucial parties may include owners, partners, majority stockholders or employees with unique skills. Regardless of your specific circumstances, if the unexpected death, disability or resignation of an individual would potentially threaten the stability of your organization, it’s necessary to acquire and maintain a key person insurance policy.
How Does Key Person Insurance Work?
Key person insurance acts similarly to life insurance or disability insurance, with employers acting as the policy owner and beneficiary. By carrying sufficient coverage, your organization may be able to access critical financial resources if a key person leaves or is rendered incapable of performing their usual duties. Without adequate coverage, a single unexpected event could leave your organization without the means to function and could even lead to bankruptcy.
The financial assistance provided by key person insurance can help employers manage the following expenses and damages:
· Finding, hiring and training a replacement
· Lost income
· Paying for time-sensitive business costs
· Purchasing a key person’s shares or interest in your organization
Who Needs Key Person Insurance?
It may be advisable for organizations of all sizes and sectors to strongly consider adding key person coverage to their insurance portfolio. A key person policy may be of particular importance for the following parties:
· Owners
· Executives
· Partners
· Sales managers
· Central decision-makers
· Employees with exclusive ties to certain clients
· Leaders with unique knowledge
Employers with thin profit margins or tentative revenue streams should also strongly consider key person insurance, as even a slight disruption caused by the absence of such an important contributor could quickly cause significant consequences.
How Much Does Key Person Insurance Cost?
Like many types of insurance, sufficient key person coverage costs may vary among organizations, with consideration also given to the parties you seek to insure. In general, you can expect insurance companies to assess the following:
· Organizational details (e.g., size, operations)
· Key person’s role
· Key person’s health history
· Key person’s age
· Policy details (e.g., type of policy, coverage limits)
Get the Right Coverage
A necessary part of regular operations at any organization is accounting for various risks and exposures. Your company should take the time to assess its key members and consider the potential losses that could arise if they are rendered unable to perform their duties.
We’re here to help. With nearly 25 years of experience serving individuals, families and businesses in North Carolina, The Peterson Agency’s insurance experts can help your organization understand its key person coverage options. Visit our website or call 336-227-0154 to get started.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.