It’s common for great companies that have over-reliance on key team members to invest in key man life insurance. These businesses understand the importance of protecting organization members who consistently rake in high profits for them. Their skillsets are irreplaceable due to their uniqueness and value. Obviously, there would be dire consequences should such team members die, or incur permanent injuries. To minimize the damage as an organization, you’ll need to invest in key person life insurance.
What is a key man life insurance?
Key person insurance is an insurance policy that organizations purchase as compensation for any financial losses incurred after a vital team member’s permanent injuries, long term illness, or death. Generally speaking, this kind of insurance coverage is ideal for founders, senior partners, directors, top managers, senior executives, and top sales representatives.
How does it work?
Well, the policy protects your business against possible financial losses in an event where a key member of the firm dies. Key man life insurance is usually owned by the company; after all, they pay the premiums from start to the end.
How does a key man life insurance save your business?
Guarantees Continuance of business
One of the major advantages of purchasing key man insurance for specific members is that it safeguards the continuance of operations through recruitment. While it is difficult to replace unique individual skills, it is possible to designate a capable replacement. The policy comes with non-taxable death benefits, which can be used for recruitment. Ideal replacements are paid handsomely and undertake specialized training to increase their competence and effectiveness.
Decreased productivity is associated with a lack of morale. The good news is that acquiring key man insurance policies on a few individuals can send the right signal to the team. It’s a direct acknowledgment that they mean something to the organization. Ultimately; it makes them feel important, respected, and appreciated. All these are great morale boosters.
Prevents huge financial losses
Incurring huge financial losses can easily cripple your business. Key man life insurance policies prevent companies from experiencing bankruptcy or even closure due to losses triggered by the death of a key team member.
If somehow a key member of your business dies, you should rest assured that you will have enough money to sort out your creditors. Debts are inevitable, and you should take the right precautions. Purchasing key person life insurance policies is an excellent way of guaranteeing creditors that your organization will continue with its normal operations even after losing a key team member.
It does not require long-Term Obligations.
Another reason to buy Key man life insurance policies is that they do not need long-term commitments. In an unfortunate event where one key employee dies, falls sick, gets injured, or decides to quit, you can always cancel the policy. You’ll not be forced to pay policy premiums against your will.
There’s no doubt that your business can gain tremendously from the simple concept of key man life insurance.