No business expects bad times but unfortunately, they knock our doors without invitations. It could be in form of accident of a key person in business or even loss of life of that crucial identity. But what leaves behind is a financial loss that your company might not be able to recover for the years to come. If that person/business partner was the only one having key information of the business, it will be even a bigger disaster for you. It’s time to ask yourself, are you planned how to fill that position immediately or help make up the financial trauma that you have just suffered? In fact, most businesses don’t and a majority of them get dissolved before they even rise.
Obviously, losing a key person in business is a critical situation for any company but having a key-person insurance helps when you need it the most. Consider it a financial support that makes up the monetary losses your business experiences after the trauma. Here are the more details!
What is Key-Person Insurance?
Key-person insurance is aimed at protecting a company’s wealth if some traumatic event happens to its key employee. He could be anyone, from a management professional to an individual, at whom company relies heavily for key decisions. Treat this insurance as a life insurance that safeguards the interests of a business in case it loses its owner/key employee. The insurance gives a financial cover to companies which have just lost key people whose absence could sink the whole business. In startups, this key person is usually a founder, co-founder or both.
How Key-Person Insurance Works?
The beneficiary company needs to purchase the key person insurance, specifying that key employee and then pay the premiums periodically. Unfortunately, if any mishappening leads to disablement or death of that valuable person, the company gets the insurance payoff. Usually, the financial assistance is a quick one to save that business losing its profits and surviving the blow of fate. Typically, this monetary assistance covers the period until that beneficiary finds a suitable replacement for that position. Or, if the company chooses to get dissolved, the insurance amount covers the debts, outstanding salaries and investor money in an appropriate manner.
The Benefits of Key-Person Insurance
On a safer note, it’s always better to make your company cash-rich, so that if the need arises, like the sudden death of the owner, things could be handled before they become miserable. However, this is not always feasible with businesses. This is why key-person insurance has come into existence. Here are some crucial benefits of this type of insurance:
- Pays off the debts when businesses run out of profits due to loss of a key-person.
- Copes up with the potential loss of revenue until business finds the qualified hire.
- Funds any special training required to help a successor take over the position.
- Provide liquid money to carry out day-to-day transactions of the business.
- Pay all dues in case the company chooses to dissolve due to loss of leadership.
- Any monetary help needed during the trauma period.
Conclusion
Honestly, there are no alternatives to key-person insurance. Even if you have some cash, it consumes quickly when you have to cope up with a traumatic situation like a loss of the leadership. These fateful events come all of a sudden, you will never know. It’s better to be planned than seeing your company losing profits every second. Secure your business future with key-person insurance today!