What would it cost you and your business to replace your "KEY PERSON ?" Most people are familiar with how life insurance works. In fact, it's the simplest form of insurance there is since it is only concerned with insuring one thing: someone's life, paid at one time. Life insurance is often offered as a benefit through work as a multiple of one's salary, or sometimes as a set amount. There may be companies that offer their employees the opportunity to purchase more insurance as part of the package, but it is always a good idea to sit down with a life insurance agent to find out how much is right for you.
As was mentioned before, most people know how life insurance works. What they didn't know was that there are many business applications for life insurance. Many savvy business owners don't even know about these ways that life insurance can benefit their business. Today, we will be talking about a "Key Person" policy. It is occasionally called a "Key Man" policy. For those who have been in business for any time, they come to realize that hiring the right people for the right position is absolutely essential to success. Over time, one employee becomes "key" to running the business, or else, that person has a skill or expertise that cannot be replaced easily. Examples of a key person would be a master chef at a fine restaurant. A key person could also be a minister at a church. Key person policies are also used to cover "key" actors in movies or television. Recently, a very well know movie star had a potential movie deal, but because of her wild lifestyle and drug use, it was almost impossible to find someone who would insure her. The makers of the film ended up going with a different star because they needed someone who was not only bankable, but insurable! You may be thinking, "but that's for millionaires to worry about. I'm just a small business owner with a small staff. Key Person insurance doesn't make sense for me." Before you dismiss this type of coverage too quickly, consider who you have working for you. Is there a person in your office that would be very hard to replace because of their knowledge of your office systems? Do you have someone in your office who has been there for a long time and that you would like to give a final benefit to their family? Then a key person policy may very well be for you. The reason an employer can write an insurance policy on someone to whom they are not related is because they have what is known as an "insurable interest." An insurable interest is some aspect of the relationship which can be defined as insurable. For instance, you would not be able to write a life insurance policy on some stranger walking down the street because you have no relationship with them that could be defined as insurable. A shorthand way to describe whether or not a person has an insurable interest is if two people have a connection of "love or money." "Love" is for a family member, and "Money" is for a business partner. Since the loss of the key person has the potential to cause financial harm to the potential policy owner, it is determined that there is now an insurable interest. While that explanation may have been a bit technical, the important thing to realize is that life insurance has the ability to protect, not just your family, but also your business! If you have a key person in your office, set up a meeting with your insurance agent to see if a key person policy makes sense for you. As always, feel free to call me if you have any questions and would like to know more about how to insure your business and "key" person.
0 Comments
|
AuthorDave Owens, Owner/Agent. I have proudly served in the Insurance Industry for over 20 years. Archives
October 2019
Categories
All
|