Businesses regularly insure their tangible, physical assets like buildings, machinery, and equipment, but often overlook their most important asset — their people. Every business, regardless of its size, has an individual or group of individuals who are fundamental to its success. Unexpected death, disability or illness sustained by of one of these “key” people can threaten the success of the company.
Key person insurance insures the business against the financial impact should a key employee no longer be able to contribute.
WHO IS A KEY PERSON?
A key person is anyone in a business whose loss would significantly impact the company. This person can be either a business owner or a non-owner employee. Employees who are “key” to the success of a business include individuals with unique leadership ability and expertise; specialized technical or creative skills or knowledge; special connections, contacts or influence; or other qualities that set them apart.
Some other factors to consider include:
Products and Innovation – Does this person have special knowledge about the company’s operations and products? Are they engaged in important long-term projects?
Competition – Would a rival company have an advantage if this person were gone?
Customer Relations – Does this person have unique intra-personal skills and goodwill? Does this person have a proven track record of being critical to generating sales?
Ability to Obtain Financing – If this person is no longer with the company, would the business still be able to obtain financial backing? What will happen to existing business debts if this person dies unexpectedly?
State Law – State-specific laws and regulations may have special definitions for who qualifies as a key person for insurable interest purposes.
To learn more about how Key Person insurance works, the benefits, and more, download our free Key Person Info Sheet HERE.
