Understanding Key Man Insurance: Coverage for Key Employees

Every company needs highly skilled individuals to thrive, because not just anyone has the experience, ability, or resources to generate the kind of revenue that makes a business profitable. As a business owner, losing an individual like this could cause great harm to your company. Fortunately, there is key man insurance to help preserve your company in the event of a tragic loss of someone who was instrumental to your company’s growth.

How Can My Business Get Key Man Insurance From Secure Insurance Group?

Key man insurance is a policy that you have to qualify for. You must prove that the employee you’re getting the coverage for is someone whose loss would significantly put your business at risk. The person you’re getting the coverage for should have a major influence on your business’s revenue and profits. In order to get this coverage, it has to be a person who is instrumental to your company’s success.

At Secure Insurance Group, we’ll help you find a key man insurance policy to help your business stay afloat after losing a highly valuable employee.

What Costs Does Key Man Insurance From Secure Insurance Group Cover?

After a key person passes away, the company receives a death benefit. Since this is for the company, the funds aren’t meant to be spent on luxury items, vacations, or anything that would solely be in one person’s best financial interests like with traditional life insurance.

How a company may use the funds will depend on the state of the business and what expenses will need to be covered. If you want to continue running your business following the death of a key employee, you may use the funds for hiring and training a replacement.

You can still get key man insurance if you intend to close your business in the event of a key employee passing away. Instead of using the funds for finding a replacement, you can use the money for paying debts the company may owe, paying investors, and for providing severance pay for other employees before formally closing the business.

No matter what you choose to do with your company after this unfortunate event, a policy from Secure Insurance Group will allow your business to make a transition without further financial loss.

How Much Key Man Insurance Coverage Should I Get?

This is always going to be subjective and vary from company to company. You can choose coverage according to the amount of revenue your key employee is responsible for generating, the costs for training a replacement, or you can decide coverage by multiplying your key employee’s annual salary by 8-10.

You’ll also want to compare quotes during this process to find that you are getting the right coverage at an affordable rate.

What Types Of Key Man Policies Can I Get?

Key man insurance can come in the following forms:

  • Term – your business has key man coverage for a certain number of years
  • Whole – your policy never expires, and a portion of your premiums go toward a savings account that builds in cash value
  • Variable – also never expires, but it allows for a portion of the premiums to be invested rather than go directly into a savings account

Term is the most affordable, but there are a couple of considerations to keep in mind. If the policy expires, your company won’t get a death benefit no matter how many premiums you paid up to that point. You can renew a term policy, but the premiums will increase due to the key employee being older.

Whole and variable both have the benefit of never expiring, but for some, they can be cost-prohibitive. If you choose a variable policy, you’re also taking a financial risk because of the investment component.

What If A Key Employee Becomes Disabled?

Loss isn’t always related to death. Losing a key employee may be from an employee losing the ability to perform his or her duties as a result of a disability. There is coverage for this, too. You can get disability coverage, and in this case, your business would receive between 40% to 70% of that employee’s salary after he or she becomes disabled.

Protect Your Business Today

At Secure Insurance Group, we always provide you with a backup plan so that your loss does not lead to further financial woes. Our policies allow for you to bounce back from the most major setbacks, and with key man insurance, you’ll be able to continue operating your business. Call us today at 877-871-7328.