What is Key Person Protection Insurance?
Key person protection (also known as key man insurance) is an insurance policy that a business purchases to cover the loss of income that can result when a key employee or owner of a business dies or becomes disabled. It may include life insurance, disability, or a combination of both. The business owns the policy, pays the premiums, and receives the payout if the key person dies or becomes disabled.
Why do I need Key Person Protection?
The loss of a key person in your business could have a severe impact. The business or practice could be devastated with sales and profits falling and increased workloads for the remaining staff. Key person protection is designed to pay out a lump sum on the death or disability of the insured key person during the length of the policy. It could significantly help the business to recover from this event. The proceeds can be used to help replace lost profits or finding and hiring a replacement of a key employee.
What Key Person Protection Insurance Covers
Key person protection insurance is purchased by the business, and the term of the contract should be long enough to extend through the duration of the key person’s usefulness to the business or practice. Key person protection covers potential financial losses to the business because of losing a key person to death or disability.
What defines the profile of a key person or key employee
- They bring in a large percentage of profits or revenues for the business.
- They provide special knowledge or talent to the business (e.g., an employee who develops a patentable product for the business).
- His or her expertise and knowledge is difficult or costly to replace.
For more information about this or another plan or if you have a question contact Andrew @ (516) 485-3311