Need a Key Man Insurance Quote?
We talk a lot about life insurance from a personal perspective, but what if you’re a business owner? If you own a business and employ people who are absolutely integral, you may need to think about getting a key man insurance quote.
What is Key Man Insurance?
Key man insurance does have more politically correct name of ‘key person insurance’. Business owners are the most likely to look for a key man insurance quote. It insures against the death or permanent incapacitation of a person considered integral to the operations of a business.
Large and small businesses can take out key man insurance. Many businesses would suffer greatly if a key staff member died. There’s the cost of training a successor or searching for a skilled replacement. It also helps to offset any loss of productivity or sales as a result of that person’s death.
How Does Key Man Insurance Get Paid?
Lump sum payments are most common for key man insurance. This means companies can make the necessary adjustments any way they see fit.
The amount of the payout will vary depending on how you’ve structured the insurance. Most insurers offer flexible options and the premium is adjusted according to the amount insured. It may also depend on the size of the business. For example, you could insure multiple key staff members, but for different amounts. You would do this because their losses would cause varying levels of difficulty within the company.
What Can I Use Key Man Insurance For?
Companies can use key man insurance in a range of ways. The company owner has discretion in this matter because the payout is a lump sum.
Some of the more common uses would be as follows:
- Hiring replacement staff
- Training a successor or replacement
- Covering loss of income
- The cost of temporary staff to keep the business running
- In small partnerships, buying shares from the deceased’s family
This last point is extremely important. Imagine you’re in a 50-50 partnership with another person. If that person passes away, their 50% share of the company would usually go to their family. This of course depends on how their will is structured.
For a partnership to remain in business, the remaining partner (or partners) would need to buy the deceased person’s share from the family. Key man insurance gives the business a sum of money by which to achieve this. This situation can be a bit messy if there are disagreements between the family and the remaining partners. That’s why it’s also worth having buy/sell agreements in place. This is a legal document outlining each partner’s plans should they pass away. Most would stipulate they want their shares to be purchased by the remaining partners. This helps the business to continue trading, while also providing a financial benefit to the family.
Finally, it really is up to the business how they spend the payout. But if a person with unique importance to your business was to die, it could mean the difference between closing and continuing to trade.
Who Can Be Covered by a Key Man Insurance Quote?
Who can be covered by a key man insurance quote? Well, there’s really no limits. As a business owner, you’re paying the premiums so most insurers won’t stipulate who can and can’t be covered. That being said, from a financial point of view, you’re unlikely to purchase this cover for every employee you have. It’s generally reserved for people who are uniquely integral to your business operations.
Generally it would be senior executives, people with rare knowledge unique to your business, a salesperson who generates most of your income. Partners will often insure each other as key people, as mentioned above.
Really, it’s up to you. If your business would suffer financial losses or someone would be extremely difficult to replace, that’s when you’ll want a key man insurance quote.
How Do I Get a Key Man Insurance Quote?
It’s easier than you think, especially with Billy Sumo on your side. He loves helping Australians save money and get the best value from insurance. Don’t let your business be caught out by an unfortunate death. Let Billy Sumo find the best key man insurance quote from our panel for you today.