A business takes life insurance for key employees to cover them if their disability or death could lead to serious financial hardships in the business. Any individual in the company, whose presence means a lot to the company, is considered a key man. After selecting the keyman, the business pays for the agreed premiums and in case the key person dies, then the business gets the proceeds.
Identification of key employees
The life insurance of key employees in the organization should only focus on the continuity and survival of the organization. It includes the employees or managers who are difficult or impossible to replace, as well as act as a loan. The person could be the manager, owner or a key stakeholder, whose disappearance threatens the success and growth of the organization. The reason the keyman insurance chooses this is to ensure that the two parties benefit from the agreement, but the business takes up the highest benefits.
There are points in time when the growth and success of the business depends on a few people in the company. Key employee insurance policy cover should only apply in this case. If the death or disability of an individual is a threat to the survival of the entire company, then they need the keyman insurance policy. Creditors get their peace of mind because the death of a key person will not imply the death of the business.
Examples of key employees who qualify for the keyman insurance cover
The business owner has a lot of work and determines how far the company will grow. If their death or disability could lead to business viability, then they will need the insurance. It ensures that the loss does not interfere with the company’s standing with creditors and the company is still in a position to seek funding.
Some sales people are aggressive and attract many customers. Such a person becomes a huge asset to the business and losing them means losing a lot of profits. They then are good candidates for this insurance because they drive top customers in the business. Covering the key sales people means retaining them in the organization.
If the company intellectual property emanated from the scientist or engineer, they become candidates of the insurance as a way pf protecting the intellectual property and the company as well. The business needs to calculate the amount of insurance required before settling on the number of key persons to cover. It should be an amount that the business affords without having to toll other business areas.
The requirement solely depends on the organization in question an they should calculate it independently with the assistance of keyman insurance.