So you or one of your key employees passes away or gets diagnosed with a critical illness. Do you have a contingency plan?
It is worth considering what the consequences would be if a director or employee with specialist skills died or became seriously ill. This can often have a large impact on a business in terms of lost revenue and staff replacement costs.
Many companies have one key person who is responsible for bringing in a larger portion of the profits and so this person becomes a vital asset to the success of the company. Keyman Insurance protects and compensates your business for the loss of a valued employee and keeps the business moving forward with a fixed lump sum of cash.
How does key man insurance work?
Key man insurance is a type of life insurance policy that is taken out by a business on the life of a key employee. It is also possible for the policy to pay out in the event of the key person being diagnosed with a specified critical illness such as cancer or heart attack. Should the key person die or suffer from a critical illness the policy would pay out a lump sum to the business and the business can use these funds to cover the costs of losing the key employee whilst they recruit and train a replacement.
You must ask yourself these questions…
Who is responsible for the following key business areas?
- Production of goods or services
- Financial control
- Sales and Marketing
What impact would their loss have on the business financially?
Could anyone else in the business do their work?
Would the business need to train and recruit a replacement?
Does the business have the money needed to find a replacement?
Could the company recover without an injection of funds to replace the loss of profits?
If a key person was diagnosed with a critical illness (like cancer) and needed time off work for treatment and to recover, could the business afford to pay their salary and a replacement’s salary?
Would you be in danger of losing a contract or important contacts if you lost a key person?
Are there any business loans in place that are secured against the owner’s family home?
Advantages of Key Man Insurance:
- It enables you to repay any loans taken out by the key person and helps with recruitment and training costs for replacement staff.
- It allows you to meet ongoing expenses whilst the level of sales recovers and also facilitates payment for outside consultants or expert advice.
- It instills confidence in staff and customers due to positive action being taken and financial obligations being met.
- There are various options to choose from with Key Man Life Insurance. You could opt for Life Cover only, Critical Illness Cover, or both Life Cover and Critical Illness Cover. You can select different levels of cover and terms depending on your requirements, and there are also policies available that pay out a regular income in the event of sickness.
SMQ Services Ltd is an appointed Representative of Health and Protection Solutions Ltd.Health and Protection Solutions trading as The Health Insurance Group is authorised and regulated by the Financial Conduct Authority.