Our insurance company will help you through the process of setting up your business with the best policy in the market. With each client that our office works with, there is always something specific that will meet their needs that is tailored for them.
Key Person Life Term Insurance Policy and key person disability insurance are the two different policies that most people do not know about.
This is a life insurance policy that is taken by the business as the owner of the policy. This means that the insurer covers a person or persons within the business.
This policy often happens when the business identifies key men or women then life insurance is bought for those key employees.
How to identify key employees
When identifying the key employees, the following are some of the points that you may want to consider:-
- Business continuity
- Impossible to replace
- Bank loan
- Business continuity
Key employee insurance should be used for any person in the business whose death is most likely threaten the community or the survival of the business. Key Person Term Life Insurance Policy gives creditors some peace of mind for they know that if they die, the business will not die.
- Impossible to replace
The key person life insurance should be also used on any employee whose death would make it impossible to replace and hence the business would find a hard time replacing.
- Bank loan
Key man life insurance will also be required on the owner of the business who desires to take a bank loan.
Examples of key employees
The owner of the business: This is important in the case that a loose can actually affect the long term and short term viability of the firm. It can affect the company’s standing with creditors hence it will be unable to secure any form of funding.
A salesperson: If your salesperson is the go to guy then for many customers and brings a large percent of the income then this something that should be watched keenly.
Software engineer: The person who developed the company’s intellectual property should be someone who is considered for the key man insurance.
How to determine the amount of key life insurance
There are so many ways that could be used to determine the amount of key person insurance that the business could need. The amount should in most cases be determined as one that a business can easily afford without going through so much.
The following are some of the areas that can be considered:
- Cost of replacement
- Multiple of income
What would be the cost of replacing an employee? The factors that can be considered the training, the time spent and bringing new employees up to speed.
Multiple of income
This is an easy way of valuation though it fails to take too much. The best way it can be done is by taking the key employees salary then multiplying it by a factor to five.