Most organizations employ at least one individual who is essential to the company’s success. This person may be a partner, owner, majority stockholder or another individual who is crucial to the business. If this person unexpectedly leaves the organization—due to a death, disability or immediate resignation—it may be hard for the organization to survive.
If your organization employs individuals who are vital to its success, key-person life insurance or key-person disability insurance can help protect you from chaos caused by their abrupt absence. These insurance solutions can give your organization options other than immediate bankruptcy should you lose your company’s key person or people without warning.
Who Needs Key-person Life or Disability Coverage?
Many organizations can benefit from key-person life or disability coverage, including those that:
In the event a vital employee becomes disabled or deceased, these types of insurance provide the company with income checks to make up for financial loss or to use for temporary or permanent replacement costs. Business owners should purchase separate policies for each key employee at the company.
How Does Key-person Coverage Work?
Key-person Disability Insurance vs. Key-person Life Insurance
When most business leaders think of purchasing key-person coverage, they turn to life insurance. However, industry leaders point out that the chance of losing a key person to disability is 17 times greater than losing a key person to death, and the costs of hiring a recruiter to replace the key person and training him or her for a short period could be much higher than finding a permanent replacement.
Considerations Before Purchasing Key-person Life or Disability Insurance
Requirements and Coverage Options
To obtain key-person disability or life coverage, the individual must be a consenting employee and you must demonstrate that your organization would incur substantial financial loss without him or her. To qualify as a key person, most insurers require that the employee’s salary be in the top 20% of the company. All key-person policies are written specifically for the employee in question. To learn about coverage options, limits and other plan details, contact Dansig Insurance Risk Advisors today.