For small to medium-sized companies, losing a founder can be devastating to a business. Crucial contacts and business knowledge can disappear. Life insurance for key person or persons can help a company stay afloat until they can regroup and take steps to find replacements. It is common for the founder/owner to have Key Man insurance, but there may also be other senior team members that a policy benefits. There are three categories to consider when looking at taking out a policy:
1. Business Survival/Continuity
Any person whose death could threaten the survival of the organization. Having an insurance policy in place can give creditors confidence in the company’s continuation.
2. For Bank or SBA Loans
Financial institutions may require a business to have a key man life insurance policy as part of the approval process. In the event of their death, the lending organization can be assured of being repaid.
3. Difficult/Impossible to Replace
Employees that have been with the company since the beginning often have an innate understanding of the business’s inner workings. Valuable information can be lost in the event of their sudden death, which may hinder day to day business operations.
Life insurance for key person can protect an organization from loss of business as the result of an unexpected death. Insurance professionals can help businesses decide who should have policies and the appropriate coverage.