If your business is reliant on an instrumental member of staff, and would struggle without them, Key Person Insurance could be incredibly beneficial. If a key employee was to pass away, this type of insurance will help to mitigate any devastating financial effects this might cause.
The majority of businesses have employees who have a unique skill or solid relationships in the industry. This could include people from any level of seniority within the business. Key Person Insurance allows the business to cover that instrumental member of staff, should they pass away or become unable to work for a long period of time.
Businesses can suffer greatly when staff pass away or become incapacitated. The pay-out from a Key Person Insurance policy can help to compensate for any losses, such as loss of profit or sales. It could even help to cover recruitment costs or pay off debts.
Key Person Insurance can be taken out on anyone who the business deems crucial to the running and success of the company. There is no hard and fast rule about who is or is not a key person; this is the discretion of the business. It could be the founder of the company, your top salesman or a technology guru who has unique knowledge.
The policy is taken out by the business, not the individual. This means the business owns the policy, pays the premiums and receives the pay-out. The policy is usually short-term, lasting around 10 years or less.
A policy of this kind can include life insurance on its own, or life insurance and critical illness cover. If the key person was to pass away or fall ill during the length of the policy, the business may receive a pay-out. It is important to remember that the illness must meet the definitions set out in the policy document.
Running a business can be challenging and sometimes volatile, and no one knows what is around the corner. Key Person Insurance can help you prepare for any eventuality, offering the right financial protection should you lose an instrumental figure within the company.
The pay-out from a Key Person Insurance can be used for a number of different things. Firstly, if your business suffers a loss of profit, the financial support can help to bridge this gap during a difficult time. This may help reduce the strain on other staff to keep the business going.
Secondly, if you need to recruit in order to fill the role left behind, the pay-out could help to cover any recruitment costs. This could be crucial in keeping the company operating smoothly and at full capacity.
Key Person Insurance is not a legal requirement, but it can provide important financial help if your business is undergoing a change, due to the loss of a key employee. Small businesses in particular would benefit from this kind of insurance, as they are more likely to have one or two significantly important staff, but many overlook it.
At Caspian Insurance, we are on hand to help you find the right policy to suit your business. We work with some of the leading insurance providers in the UK, allowing us to compare the right cover for your needs.
If you would like some further guidance on whether your business would benefit from taking out Key Person Insurance, get in touch today.
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