Can Key Person Insurance Protect Your Company's Revenue?
While you value all your employees, some may have a more direct impact on your revenue than others, especially if you run a small business. If just one or two people create most of your revenue, then you may worry about what would happen to your company if these employees couldn't work. Can key person insurance help?
What is Key Person Insurance?
Like any business coverage, key person insurance gives you financial protection in the event that something bad happens. The difference here is that you insure your business against the loss of a person or people.
So, for example, this insurance protects you if an insured employee suddenly can't do their job. Depending on the policy you choose, you could get coverage for a serious illness, disability, accident or even death.
One of the primary benefits of key person coverage is revenue replacement. Here, your insurance company covers the loss of revenue that your employee would normally bring in for a set period of time. This gives you financial breathing room until the employee can return to work or you find a replacement. Some policies also include recruitment and training benefits in case you do need a new hire.
Do You Need Key Person Cover?
Think about what would happen if your top revenue earner was suddenly unable to work for a long period or even permanently. Do you have other employees who are willing and able to take over the person's job? Will they bring in as much money?
If the answer to either of these questions is no, then your business could be in trouble if you lose this key worker. Chances are, your income and profits will dip, and it will take you some time and money to replace lost revenue.
Plus, if your company earns less, then you may scramble to find a way to meet your current financial commitments and to keep your business on an even keel. This can put a big strain on your company finances. Key person insurance can be an effective way of protecting your business financially if you have this kind of employee loss.
Organising the right key person coverage can be complicated, especially if you've never done it before. If you're interested in learning more about how this coverage could protect your company, talk to business insurance brokers. They will be able to answer your questions and, if you decide to go ahead, to search the market for the best policy.