Have you ever considered what the impact would be to your business if you or one of your key employees was unable to perform their job on a day to day basis, either through illness or, more drastically, death?
If you lost your right hand man (or woman) would the business be able to survive with-out them?
If you do lose that key employee then it will always be difficult to compensate for the loss of expertise and knowledge, but there are routes that can be taken to mitigate the financial impact of the loss.
Key Person (or sometimes Key Man) insurance can be taken out by a company to cover the financial liability of losing the person (or people) who really make a fundamental difference to the way the business runs.
In effect what happens is that the company itself purchases an insurance policy on the identified key people and pays a regular (usually monthly) premium. If the covered individual unfortunately dies then the company receives the insurance pay-out rather than the individual’s estate. This money can then be used to off-set any financial impact incurred, for example to keep the company trading or to cover a fall in revenue or profit. It could also be used to recruit or train someone to replace the lost employee.
But how should you determine who needs insuring? The best way to do this is to look at the company in the short term and determine who you think is irreplaceable. In many businesses there are often employees who take on a number of business critical roles – if you lost these people would you find the business would be in trouble.
Cover is not just about death though; there are other types of key man insurance which cover illness or incapacity such as Business Income Protection, which for a premium, will provide a monthly income to the company if the insured person is unable to work due to incapacity.
At Davies Corporate Finance we are experienced in finding the best types of cover for your key people and we can also provide Shareholder Protection (to cover if a shareholder dies or is critically ill), Business Loan Protection (to cover corporate loans) or Partnership Protection (to cover against losing your business partner to death or critical illness).
So if you haven’t considered the impact of losing somebody crucial to your business, perhaps you should do it now and then contact us to find out how we can help.
