What is Key Man Insurance ?
Key Man Insurance works as a business safeguard against the financial blow of losing a key employee. Such an employee is a team member whose loss, unexpectedly or over the long term, would truly impact a company's success. It's not just that the employee in question is important; it's that underperformance, in their area of expertise, would have a negative ripple effect throughout the organization.
In a lot of instances, it is the unique skills, leadership, or client relationships of the insured individual that make them truly indispensable to the organization. It’s a kind of insurance that protects the company against the disaster of losing such a key person unexpectedly. Except it doesn’t cover the person, really. Key man insurance covers the company. The name comes from when it was first offered, when only men were considered key (even if they were not). But now it covers key individuals regardless of gender.
Investing in Key Man Insurance is something that many businesses do. Ultimately, however, this kind of policy could do little more than open up a line of credit and make the future investors and lenders a little more comfortable with the business they just loaned money to. Why? Because Key Man Insurance essentially helps a business prepay for a future service that another person might have to provide.
Moreover, the policy can be tailored to meet the unique needs and associated risks of each business. When setting the coverage amount, companies usually take into account such criteria as the individual's job function, level of expertise, and influence on the company's earnings. This is why so many firms regard Key Man Insurance as a must-have part of their overall risk management efforts, especially in hit-or-miss markets where rivals are forever trying to poach one another's people.
( Information provided is only for general education purpose. Consult your insurance advisor for advice on the policy schedule suitable for your business )