Think about the key people in your business. You know—the ones without whom your company would falter. Now, imagine if something happened to them… If they were no longer able to work for you, what would happen? How would your business survive without them? That’s where key man insurance comes in. It can help protect your company financially if something happens to one of those essential employees. But is it worth the cost? Keep reading to find out.
What is Key Man Insurance Policy?
Key man insurance is a life insurance policy taken out by a business on one of its employees. The death benefit from the policy is used to help the business financially if that employee dies.
Why Do You Need It?
The loss of a key employee can be devastating to a business. Not only do you have to cope with the emotional loss, but you also have to find a replacement and train them—all while trying to keep your business running smoothly. And if that wasn’t enough, the financial impact can be significant as well.
According to a study, the average cost of replacing a key employee is $1 million. If your business doesn’t have the cash on hand to cover that kind of expense, key man insurance can help. The death benefit can be used to:
– Find and train a replacement
If you have to replace a key employee, the process can be time-consuming and expensive. The death benefit from a key man insurance policy can help cover the cost of recruiting and training a new employee.
– Keep the business afloat
If the loss of a key employee would jeopardize the future of your business, the death benefit can help keep it afloat until you can get back on your feet.
– Pay off debts
If your business has debt, the death benefit can be used to pay it off. This can help prevent your business from having to declare bankruptcy.
How Much Does It Cost?
The cost of key man insurance depends on a number of factors, including:
– The age of the insured
– The insured’s health
– The death benefit amount
– The policy’s term length
As a general rule, the older the insured and the higher the death benefit, the more expensive the policy will be. However, you can get a rough idea of how much key man insurance might cost by using an online calculator.
Is It Worth the Cost?
The cost of key man insurance varies depending on a number of factors, including the age and health of the employee, their salary, and how essential they are to the business. However, it’s generally quite affordable—especially when you consider the potential financial impact of losing that employee.
Plus, many businesses find that the peace of mind key man insurance provides is well worth the cost.
When it comes to key man insurance, there’s no one-size-fits-all answer. The best way to determine if it’s right for your business is to speak with an insurance agent who can help you assess your needs and find a policy that fits your budget.