Key Person Life Insurance
It is the small businesses that help keep our country and economy going. If a business loses someone vital to the company, a small business could dramatically suffer financially. The company needs help to keep going after that loss and there are options available you need to know about insurance-wise.
Key person life insurance is type of insurance that helps a small business stay afloat after the loss of an important person in that company. Many people over look this type of insurance until it is too late.
The “Key Person” Is Anyone Important
In small to medium size businesses, the key person is defines as someone who is vital to the companies business operation or income. This could be the business owner, a top sales rep or the person who does the financing. What would happen to that small business if one of these key people were to suddenly die?
There may be a rough period of transition until a replacement is found. Depending on the size and structure of the business, if the owner was the one to die, that could mean the resulting death of the company. If a top sales person was lost, it may mean losing some of those accounts that kept the business running.
Many times small companies employ a person who has been handling the books for years. It may be months before another person can step in and effectively handle the finances. The small business can lose money in the meantime.
You Need Life Insurance For The Key Person
By not recognizing the affect the death of a key person may have on the organization, a business may be setting itself up for failure should the worst case happen. For Instance, assets of the company may be frozen if the owner dies. If a VP of sales passes away, income from the top sales account could be lost.
The loss of the head of finance could mean AP and AR get completely overlooked causing multiple problems in cash flow. If that person has life insurance, their family will be covered, but what about the business? A few simple steps can be taken that will help ensure a business will be prepared for the unexpected.
Key Person Life Insurance For The Company
Key person life insurance can do several things for a company. First, it can give a company the means to establish a business continuation plan. The continuation plan is very important and keeps a company from loosing too much money when a key person passes.
The Second thing key person life insurance can do is provide the economic means to find a replacement and give them the training needed to fulfill the duties of the person that was lost.
In situations where the death of the owner otherwise means the death of the company, key person life insurance can be used to pay existing debt and allow for an orderly transition to take place.
If the owner or president of the company dies, certain things must happen in order for the small business to survive. In addition to roles being shifted inside the company, new people may have to be hired and trained to fill the old position.
Is Key Person Life Insurance Important For You?
The need for key person life insurance depends on your circumstances; maybe you haven’t thought about the need or even considered it. If your business relies on you or key associates, you should think about what exactly it is that you need to protect.
Many business owners want to keep their business running not only for their families, but for their employees as well. Key person life insurance can give you the peace of mind you need knowing that your business and employees are taken care of if the unexpected were to happen.