Identifying Employees Who Need Key Person Insurance

Your business is a well-oiled machine. When everything works, it works great, and a large part of that is the great staff you assembled in your company. So what happens if a key staff member is suddenly taken out of the picture due to accident or even death? Today, H&K Insurance looks at finding the key people in a business and key person insurance.

What is a Key Person?

A key person is someone whose skills, be it their experience in the business, knowledge in their field, or leadership to the company, are vital to company operations. These are the people who are the lynchpins to a business; they are the prime gears in the machine.  Without them, a business comes to a grinding halt. Be it halting development or production, missing internal or external deadlines, such as payroll or vendor payments, or the complete halt to operations, losing these key people, even temporarily, represents a massive financial blow to the business.

What is Key Person Insurance?

Key person insurance, also known as “keyman” insurance or “key man” insurance, is designed to cover this risk by compensating a company for the financial losses that would occur if injury or death removed a key person from the business. Key person insurance works as a kind of traumatic injury or life insurance, which compensates a business similar to business interruption insurance for the loss of this employee. This is a vital kind of business insurance for protection, and in cases of succession, a continuity of a business if one of these key people were incapacitated.

Examples of Key People in a Business

Business, both big and small, can have people that fit this requirement. As business owners and board members, it’s important to determine who in your business is so critical that the loss of them would dramatically affect the business’ ability to function. Here are three roles in a business that commonly fit the requirements for needing key person insurance:

1. Veterans

Veterans not only have a great deal of experience, but they are also the person people turn to in a crisis, troubleshooting, and for developing policy. They are the unsung heroes of your business that makes it work. It would be beneficial to find out if you have any veterans at your business.

2. Leaders

Management and administration are critical to any business, but certain individuals, due to either their lack of rapport with staff or their diminished administrative knowledge can cause the entire business to seize. If you have an administrator who is the only one who knows how to run the day to day business, or a manager whose charisma is the only thing holding a group together, make a note.

3. Specialists

When it comes to your product or services, are there individuals who are the only ones who know how to do it? From creative design to manufacturing, if you have specialists in the field that set you apart (or in extreme cases, you completely rely on to make your product), make sure to have them insured.

4. Sales Team

Do you have a top person in sales? If your company relies on a few individuals’ skill and knowledge to maintain and sign up new clients and sales leads, that’s an investment worth protecting. For those who bring in the money to your company, think about signing them up for key person insurance.

Ready to get insurance to cover these vital staff, or need assistance finding them? Contact H&K Insurance, and our business insurance specialists will help.