Business owners have several expenses they must consider when they are budgeting for their company. Start-up costs are accrued before a business opens its doors to customers. It may take up to three years to recoup these expenses. This can prompt some business owners to trim expenses as much as possible, particularly in the early stages of operation.
Insurance is a mandatory requirement for business owners. Property insurance will compensate owners for losses due to theft or damage. Liability insurance will protect your company from paying damages if you get sued. You may opt to have income insurance. When you are navigating your company’s insurance needs, it is important to weigh the benefits of each option. If you are considering key person insurance you should take time to learn what this insurance provides and whether or not it is an essential investment for your business.
What is key person insurance?
Key person insurance is designed to protect a company from the loss of a critical staff member or owner. The loss may be due to the person’s death or the result of injury or illness that prevents them from continuing to work for your company.
Key person insurance is not the same as income insurance. Income insurance provides income to individuals when they are unable to work. It will pay benefits to you directly if illness or injury affects your ability to work. It does not cover the costs of a company losing the services of an essential employee or owner. Business owners are not compensated by a co-owner or staff’s income insurance policy.
Why is key person insurance beneficial?
Critical team members are staff or owners who perform essential services for your company. They may be responsible for attracting clients because of their experience or reputation. They may also execute essential tasks that no other staff member is equipped to perform.
Key person insurance offsets the financial losses that stem from the need to replace a critical employee or business owner. It provides companies with a financial buffer to help them transfer clients, reassign duties, and perform other operational tasks that arise when a crucial team member is lost.
Which insurance policy is the best investment?
You can compare life insurance with iSelect and receive a life insurance quote for yourself or for members of your staff team. You can also use iSelect to navigate key person insurance options. This will help you identify the right insurance policy and best insurance company to meet your business needs.
When you are reviewing insurance options it is important to consider how much they cost, the number of benefits paid, and what conditions the benefits are limited to. For example, life insurance policies pay a death benefit after a person dies. They do not provide coverage when an individual is unable to work. It is important to compare all of your coverage options to ensure that you have the best insurance policies to suit your business needs.
Who is eligible for key person insurance?
Business owners can ensure co-owners or other essential employees and individuals. In the event of a co-owner’s death or illness, you may need to buy out the partner’s portion of the company. Key person insurance can be used to cover those expenses.
You may not want to invest in staff who can be replaced with minimal costs. For example, a delivery person’s role can be covered by shipanon.com. Ship Anon can be used to discreetly ship goods directly to your clients. This service allows you to outsource business shipping arrangements to a reliable company that can satisfy your client’s needs and prevents you from incurring the expense of replacing staff.
Can key person insurance cover sole operators or those with pre-existing conditions?
If you are a sole operator and run your business yourself, you can consider acquiring key person insurance to protect yourself in the event you are unable to work. You can also consider other forms of insurance, such as income insurance or business expense insurance.
Individuals with pre-existing conditions are eligible for key person insurance. You will still be able to insure any essential member of your staff team, even if they have been diagnosed with a serious health issue.