The employees that work for a small business can be essential to its overall success in the marketplace. However, businesses are not immune to the unfortunate loss of vital employees due to accidental death. Key person life insurance coverage is able to offer some level of protection for businesses that experience this type of sudden loss, but business owners often fail to utilize this protection.
Should Every Employee Have A Key Person Life Insurance Policy?
The purpose of a key person life insurance policy is to protect the business in the event that a vital employee that is extremely difficult to replace is lost. When a business face this loss, it can be hobbled for many months or years as it attempts to rebuild the brainpower that allows the company to thrive. For example, a business that suffers the loss of a visionary leader or product designer could face a long search to fill their position. By having a key person life insurance policy in place, your company can be protected from catastrophic losses. While the death of any employee is a tragic event, key person life insurance is typically reserved for those that would essentially cripple the business if they were suddenly lost.
How Can You Determine The Amount Of Coverage For Your Key Person Life Insurance Policies?
One of the most important decisions when buying any type of insurance policy is the amount of coverage to include in it. This is no different when it comes to key person life insurance coverage. Unfortunately, businesses will often struggle with identifying the replacement costs for employees or executives with difficult-to-measure skill sets. In these situations, a safe rule of thumb is to attempt to consider the bottom line economic impact that the loss of the employee would have on the business. A commercial insurance agent will be able to help you with understanding the steps for calculating this so that you can make an educated decision about a policy.
What If An Employee Leaves For Another Position Or Retires?
Sadly, it can be possible for a business to face itself losing a key employee due to them retiring or leaving for a competitor. In these situations, the key person life insurance policy will be unlikely to provide benefits as these policies usually only cover death. However, you will need to update your key person life insurance policy when you fill the position so that the new employee will be covered.
For more information on key person life insurance policies, contact your insurance provider.
After months of trying to figure out how to protect my family's assets, I realized that one of the biggest liabilities we had was me. I knew that if anything happened to me, my wife and kids would have a tough time recovering financially, so we began working hard to track down an appropriate life insurance policy. It was really interesting to me to see just how much of a difference a little focus made, and before I knew it, I was completely signed up for a great policy that I knew I could count on. This website is all about protecting your future.