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What is Key Person Life Insurance Policy
There are different kinds of insurance that businesses should consider taking out – trauma, disability, and life.
Whether you’re a small-scale business or a large corporation, taking out a Key Person Life Insurance Policy can help you and your business survive any kind of financial tragedy.
The first kind of insurance is taken out and paid for by the company. If the said individuals contract any of the specified illnesses (heart attack, stroke, cancer, and so on), the insurance provider will pay the company an amount equivalent to the insurance premium.
The second kind of insurance is also paid by the company that covers the health of a key employee or key executive. If the said person gets sick to the point that he becomes fully and permanently incapacitated to carry out his duties to the company, the insurance firm will pay the insurance premium to the designated beneficiary.
The last kind of insurance is called Key Person Life Insurance Policy and is also insurance taken out and paid for the company. Unlike the two previous kinds, this type of insurance is taken on the life of a key employee or key executive of the company.
In the event that the said person passes away, for whatever reason, the insurance firm will pay the designated beneficiary with insurance premiums. The designated beneficiary is the same company that paid for the insurance.
The premium can be used for hiring, training, and paying replacement employees, pay up debts and other financial obligations, or add to the business capital.
Who Can Be The “Key Man” Of The Company?
The key person or key man is the indispensable person in the company whose health and life is vital to the survival of the organization. It could be the person with a set of specific and unique skills that are essential for the business. In the pharmaceutical industry, a key person could be a top tier researcher who has knowledge of the drug that the company has been researching on for years. In a hospital, it could be an excellent neurosurgeon who can do extremely risky head surgeries, and so on. The type of industry and the size of the company determine who their key person is.
How Can A Key Man Life Insurance Save The Company?
Imagine when the top-tier researcher or best neurosurgeon suddenly passes away, becomes terminally ill, or becomes permanently disabled? If these organizations don't invest in key man insurance, they might get in deep trouble.
For those who did, they can easily get coverage from the insurance firm and use the money to find a replacement employee who they can train or someone who is highly skilled to take over. Also, they can use the money to pay their debts, or pay up investors who will be exiting the company. Either way, the steady and huge cash flow can greatly help the business get back on its feet and thrive again.
So, think about the future of your company if you or your highly valued employee leaves. Talk to Special Risk Term, a licensed professional insurance agency, and secure your future today.