Protecting a business against any possible liabilities is vital to the long term success and longevity of the business. While there are measures to take to protect the physical assets a company relies on, it is also possible to protect the “intangible” assets that are key to any profitable business. Key Man Life Insurance, which may be referred to as Key Person Insurance as well, is a way for businesses to protect themselves from the potential loss of a valuable employee.
The Purpose Of Key Man Insurance
Keyman Life Insurance is used to compensate a business for any losses they may incurr, due to the death or loss of an employee who is essential to the operation of the business. In most cases this is going to be a senior level executive, or a business partner.
In some instances, when the partner in a business is unable to continue with the partnership, the other half in the partnership may not be able to afford to continue without the partner’s contributions. Key man insurance will compensate the business, which can be used to buy out the partner share in the business.
If a valuable employee or partner is lost, the process to replace that employee is of the utmost importance. Recruiting new employees is a time consuming and expensive process. The compensation made to the insured business can be used to hire a recruiting agency, or to pay for an in house operation.
In order to maintain the growth of the business, the new employee must be properly trained in order to be as effective as the previous. Training takes time and money, and a key person insurance policy can help pay for training costs.