Partner Article

Finding the most appropriate key man insurance

Any person involved in business already knows that if you are keen to protect your business assets then insurance is something that can help.

Elements of business company insurance that you may be familiar with may include cover for:

• inanimate things like your buildings or infrastructure, plant and machinery etc;
• less tangible elements like debt exposure, providing protection against defaulting debtors.

You might also help minimise costs to your business and improve the morale and possibly even the health of your employees by providing them with health cover.

One element of insurance that you may not be as familiar with is the area of key man insurance.

Within any business there may be one individual or several who are critical to the on-going success of the company.

If they were to fall ill and be unable to work for an extended period of time or in the worst case, pass away, you may find that there could be an immediate and possibly devastating effect on your business.

Taking out insurance for these key individuals may provide you with a financial buffer payable in the event of their death or critical illness, so as to allow yourself the time to fully recover from the effect of their inability to work.

There may be a number of options for this type of cover, depending on the role of the key individual in the company. What may be best for one business may, therefore, not be best for yours - so which one might be the best in your circumstances?

There may be any number of reasons why an individual may be a key component of your company. They may:

• have important contacts in the business world which would be lost;
• be instrumental in finding funding and resources for new developments;
• have detailed knowledge of the very fine detail of how the business works ? its systems and process, that may be difficult to replace;
• be highly regarded in your business sector, which may result in a loss of confidence if they were not around;
• contribute a significant portion of the company profits through their role in the business.

The main elements of this type of cover that may help to safeguard the success of the company are:

• keyman insurance ? providing cover for the financial impact of having to recruit, train and get your key replacement fully up to speed and integrated into your organisation;
• loan protection ? the loss of a key person may have an impact on your business profits and affect your ability to service existing debts
• shareholder protection ? if the key individual is a shareholder in the company then this could have on-going implications for the financial health and viability of your business.

Finding the most appropriate protection for your business may be crucial for its on-going success.

This was posted in Bdaily's Members' News section by Jason Hulott .