Many types of businesses rely on individuals or groups of people to make strategic business decisions for their organization. These managers, key people who are critical to the continual operations of the organization, keep the business competitive and profitable. If your business has a similar structure and one or two of your key people could no longer perform their job duties due to death or disability, would your business be responsive enough?
The loss of a key player on your business team often leads to financial loss and the loss of vital information that supports your business strategy. The National Association of Insurance Commissioners conducted research on the subject that indicates that only 22 percent of small businesses have purchased key person insurance.
What is Key Person Insurance?
Key person insurance is a business insurance policy that provides your business with the financial backing it needs to move forward in the event of a loss. Many businesses purchase these policies for their CEOs, CFOs, owners and other individuals who help keep the business financially solvent.
Key person insurance is a commercial insurance policy in which the business is the beneficiary. The business is responsible for making monthly premium payments and managing the policy. As the beneficiary, the business receives the benefits of the coverage, the insurance payoff, in the event of the key person’s death or disability.
How Much Key Person Insurance Does Your Business Need?
Since key person insurance coverage exists to help you sustain your business in the event of a loss, you need enough coverage to ensure that your business can remain operational after the loss. The coverage amount you should purchase must fit in your budget, but it must also be enough money to make the business whole, which is substantially more than the key person’s salary. A review of long-term financial obligations is a start in helping you determine the amount of insurance you want to purchase.
Do not allow your business to be among the 78 percent of businesses that are currently ill-prepared for the loss of a key person. By purchasing a key person insurance policy for your organization, you increase the chances that your business will survive and continue on its current trajectory after the loss of one of your key people.
Protect your business by protecting its people. Call GetAPolicy.com at (903) 268-1026 for more information on Greenville business insurance.