If you own your own business, you’ll have insurance in place for your buildings, stock and vehicles, and you will be likely to have public liability insurance. You may also be insured for professional indemnity and legal costs – but have you considered insuring your most important assets – your key staff?
In the US there are many small, often family, businesses with up to four employees – if one of those key staff were to die or fall seriously ill, it could mean the end of the business, and this goes for limited companies, partnerships and sole traders.
If you are one of those people then you should seriously consider Keyman Insurance, and here’s why. Keyman Insurance financially protects businesses from the effects of serious illness or death of staff who are central to the success of the company. It does this by providing cash when you need it most, so you can cover loss of profits, inject more cash into the business, or take on temporary staff.
There are actually four different types of Keyman Insurance:
- to help your business recover during the time that your key person is away from work, or to train/take on somebody new;
- insurance against loss of profits;
- to provide protection for shareholders or partnership interests; and
- for people providing businesses loans or banking facilities.
1 Protecting your business if a key person is away from work
Your key people are the ones who are an essential driving force in your business – the people who if they were away from work for a long period, your business would suffer greatly. This could mean a reduction of sales and profits, or it could mean your business is shaken to the core. Look at the Directors, Partners, owners, think about your senior managers – every business is different but the key people will soon become apparent to you.
Insuring these people will ensure that if they are ill or die, you will have the cash you need to take on someone new, or train a replacement.
2 Keyman Insurance to insure against loss of profits
Losing key staff can have huge ramifications, if they are central to the success of the business then their loss could leave you facing bankruptcy. It’s a good idea to insure against this possibility.
3 Keyman Insurance for Shareholders or Partners
In this case, the insurance will protect the company if shareholders or partners become seriously ill or die. Families may want to sell their share in the company which leaves the remaining members open to newcomers entering the business. Keyman insurance schemes can be used to provide capital to purchase the shares from the original shareholders or their estate.
4 Keyman Insurance insuring Guarantors
Many small and new businesses are required to provide a personal guarantee or a charge on their personal property when they take out a loan. This especially applies to small and new businesses. If one of these guarantors becomes critically ill or dies, then the lenders may decide to recall the loan. Keyman Insurance can protect you by paying off the loan and taking all the pressure off the guarantor/guarantor’s estate.
Most of the US’s top insurance companies offer Keyman Insurance as a natural progression from their Life and Critical Illness Insurance provisions. They can advise you further on what type of policy would be best for you.