It’s true that businesses need buyers to survive and thrive. That’s why there’s a saying that goes: “The customer is always right.” This is because you have to delight your customers by providing excellent products and services.
However, on the other side of the coin, you shouldn’t neglect your well-being as the business owners as well as your employees’ welfare, because they are the ones that enable your company to run smoothly. This is where key man insurance comes in.
Key man or person insurance is a life insurance policy that a business buys on behalf of essential people in the organization. This plan puts the company as the beneficiary, as well as the entity that pays the premiums.
If you find yourself asking who needs key man insurance? The answer is every business owner and their key employees. This safety net can minimize the risks of financial losses in case you lose a vital member of your team, whether through labor piracy or health problems.
Here are the reasons why it’s important to have key man insurance in your business:
A key employee is defined as a crucial person in your team. For instance, as a business owner, there’s a high risk that your company will cease operations in the event of your untimely demise.
You can also consider your development team as key employees because they are the ones most knowledgeable about your products or services. Some even take out insurance on their salespeople partly as a reward for their performance as well as to retain talent as much as possible.
A portion of the money can be allocated to your workers’ retirement plan or a death benefit that their families can receive. While the insurance won’t return their loved one, it’ll lessen the burden that the grieving spouse and children experience for that mournful season.
These are the typical key personnel in the corporate world:
Life’s a risk. Not to be a downer, but there’s no telling when you or your team may be caught in the middle of a car accident or other potentially life-threatening situations like home burglary.
Getting personal life insurance is wise. For business owners, you also have to take out a key man insurance policy to make sure that your enterprise can continue even when you lose a valuable member of your team.
Essentially, a key man insurance policy protects your company and the people in your organization. You minimize the risk of future losses in the event that you lose a valuable employee because you can use the money to find, hire, and train a replacement as well as offset revenue drawbacks that are a result of the worker’s departure.
Ponder on this situation: you run a Software as a Service (SaaS) company, and you have a right-hand person who helped you develop the application. The creation of the program is just the beginning. Both of you have to continue improving the software to cater to consumer needs.
However, one day, your employee suddenly suffers from a heart attack and dies. Aside from leaving behind his family, he also has unprocessed orders and pending tasks regarding the development of the program.
If you took a key man insurance policy right at the start of your business, you wouldn’t have as much of a problem in finding a replacement. As mentioned above, you can use the money to look for new talent and train them.
With this, you won’t have to cease operations or, worse, close down your business and start a new one. Generally, it costs more to declare bankruptcy and put up another company. You can continue working on your product and deliver the best service to your customers without worrying so much about your finances.
The types of losses covered by key man insurance include:
Taking out a key man insurance policy is part of risk management. It can prove to investors that you have the foresight and business acumen to prepare for the future. It also shows that you are serious about your enterprise and that you take all precautionary measures to ensure that their money won’t be wasted when they invest in your venture.
Having your business and employees insured doesn’t mean that you’re planning to fail. On the contrary, you are actually putting up safeguards in the event that something unfortunate happens to you or your staff.
Reducing the risks for your company can entice investors to trust you with their money. Other ways to attract potential investors are:
Taking a key man insurance policy is a wise strategy to protect your company against future losses. Nonetheless, its other purpose is to serve as a benefit of your employees to lessen the damages they incur when they become incapacitated and are unable to work.
With this, you can boost how consumers see your brand. You won’t just be another company that makes money off of their employees while treating them inhumanely. Instead, you’ll set a standard in your industry and show your clients, investors, and competitors that your team will treat you well if you take care of them.
As mentioned above, key man insurance is one perk that you can provide to your employees. It can be added to their retirement plan. The benefit will make them feel that you notice their efforts and are thankful for their contributions to your company. It’s an excellent way to gain their loyalty and reward them for it.
Taking out a key man insurance policy for essential employees protects your business as well as your workforce. You ensure that your company will continue to operate even when you lose one significant member of your team by using the funds that you will receive to recruit and train their replacement.
It may sound callous, but it’s a practical business strategy. Accidents and injuries are possible, and you have to account for these things to show investors that you are serious about your venture. This practice can also bolster consumers’ perception of your brand as well as boost employee morale.
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