KEY PERSON COVERAGE
“Key Man” Life and Disability Insurance insures a company against the potential loss or disability of a vital employee(s). A vital entity is any person who has the ability to directly affect the commencement of business or incur severe financial losses to a business. (e.g. a top sales person whose loss or inability to perform their job would dramatically effect company revenue). This type of insurance is basically allowing a business to insure an actual person who is an important asset to the company.
There are many things a company should consider when looking to purchase key man insurance. First off a key entity or vital entity, in a business is a person how is vital to business. Without this person available to do their job the business would suffer drastically and there would be potential revenue loss that could be catastrophic for the company. Generally a key man refers to the owner of a business, a partner, manager or top salesperson.
Most of the time the ‘key man’ is someone considered to be of top level in a business and whose contribution or work is absolutely essential to the success of the business. There is no legal definition of ‘key man’ as far as insurance policies are concerned, however key person coverage is insurance that will act as a buffer to the risk of financial loss should this insured ‘key man’ become unable to perform their job (due to death or disability) This policy is available in order to help a company continue operations and financially survive the absence of someone vital to the organization. The policy, should the benefit ever need to be collected on, attempts to place monetary value on the job done for the business by the ‘key man’ and also takes into consideration the revenue or financial gain the ‘key man’ provides doing their normal work.
Key man policies are normally taken out for a period ranging from ten to twenty years; however the policy term cannot exceed the estimated longevity of that person with the organization. This type of policy is meant to also cover any costs to train or replace personnel in order to take over for the key man. In addition the insurance covers any revenue associated with lost opportunity, lost sales or even lost income the key man would have provided the company with. For any business that is highly dependent on certain individual(s) key man insurance can greatly reduce the risk of financial loss or ruin should something happen to the vital personnel insured under this type of policy.
Tags: Denied Disability, Denied Disability Claims, Denied Disability Insurance
Denied Disability Denied Disability Claims Denied Disability Insurance
