As a small business owner, you’re going to have to make important decisions regarding insurance. Many small businesses struggle on whether or not to provide health insurance to their employees because group plans are expensive. The decision of whether or not to provide health insurance is up to you, but one of the downsides to not offering health insurance is that valuable employees may decide to move to a company that offers insurance.
Regardless of whether or not you’re providing health insurance, you are going to what to invest in other insurance policies that protect your entire company. One type of insurance you’ll want to invest in is key man insurance.
What is key man insurance?
Key man insurance is a type of business insurance that serves as life insurance to key employees of your business. Key employees are defined as your company’s most essential employees, such as your founders or your main admin assistant. If a key employee suddenly falls ill with a critical illness or dies, key man insurance will provide a sum of money to give financial support to the company.
It is not the same as life insurance. Life insurance is given to the family. Key man insurance is given directly to the company. The company can use the funds to find a replacement and pay off debts. Some small businesses may also need to use these funds to pay off investors and provide severance to employees so that the business can close down.
What are the benefits of key man insurance?
As mentioned above, key man insurance provides your company with a fund of money if something happens to one of your key employees. In a small business, every employee is essential. If something should happen to one of your key employees, there is a possibility that your business will come to a screeching halt. The loss of an employee can result in a loss of productivity, which can lead to financial troubles. Key man insurance helps ensure that your business can continue to run until a replacement can be found. Without some form of financial backup, you could face bankruptcy.
Key man insurance directly benefits your company. If you want to provide financial support to the employee’s family, you’ll also need to have a life insurance policy in place.
Who should be covered under this insurance?
Key man insurance should cover anyone who plays an essential role in the company. If their role cannot be easily filled by another employee in the company, they are considered a key employee. For example, founders are considered key employees because they usually play multiple roles within the company and have knowledge that other individuals in the company don’t have. In addition to the founders, some small businesses choose to cover their main admin assistant, their top salesperson, and their main software technician.
How do you find a policy?
Choosing the right policy means shopping around. You’ll need to do careful research to find the company for you. You’ll want to consider the cost of the policy, how much the policy covers, and if there are any limits.
Finding the right policy for a small business can be complicated. If you’re struggling to find the right plan for your company, consider talking to a financial advisor. A financial advisor can sit down with you, go over your options, and help you determine what policy would work best for you.
How much does key man insurance cost?
The cost of key man insurance varies depending on the company. Most companies will adjust costs depending on the age and health status of the person being covered by the policy. For example, an older individual or an individual that has health concerns will cost more to cover than a healthy young adult.
Most companies provide online calculation tools that will provide you with a quote. For example, My Key Finance, who are experts in key man insurance, has the tool available right on their website. If you’re not comfortable using an online tool, most companies will also provide a phone number so that you can talk directly to a representative of the company.
Key man insurance can help keep your small business running if a key employee gets critically ill or dies. Don’t wait until it is too late. The death of a key employee can be a huge financial setback for small businesses. Having the right policy can help keep your business running until a replacement can be found.