A business can lose a key person due to disease, disability or even death. The loss of a key person can affect the expenses, revenue and profits of the business. Key person insurance protects the business from the sudden loss of the key person.
Read on to learn the factors to consider before you buy a key person insurance:
Related read: What is Key Person Insurance?
Who are Covered Under Key Person Insurance?
A business buys a life insurance policy on the life of the key person. The business needs key-person insurance if the loss of the individual would negatively impact the business. Why? It would be almost impossible for the business to continue without the key person. Therefore, the key person insurance covers the life of the most vital employees of the business, including key project manager, financial controller, key manager or salesperson, business partner, director of the company, and more.
Who Needs This Cover?
If the growth of your business depends on one key person, then you may need key person insurance. The key person insurance will cover your daily expenses, loss of revenue, business loans, recruitment and training and co-founder’s shares.
What Are the Types of Key Person Insurance in Australia?
Loss of Revenue
It covers the profitability of the business. It protects the revenue of the business if the loss of a key person may impact the financial performance of the business. Key person insurance compensates the business to allow the business to run smoothly.
It covers the key individuals who are guarantors on credit facilities or business loans. It also protects the business’s capital value. If the business loses the key individual due to a disability or death, the business can use the proceeds of the insurance to repay loans.
It covers the partnership interests and shares in the business. If the business partners lose a business partner due to a critical illness, disability, or death, buy-sell insurance provides a mechanism for transferring the business interests between the business partners.
Also read: Key Person Insurance – FAQs
How to Proceed?
Once you decide to get a key person insurance, it is better to talk to an expert to help you select the right policy for your business. Choosing the right insurance policy for your business can save you a lot of money in the long run.
If you want to get a key person insurance cover in Perth, Western Australia, then contact Absolute Insurance to chat with an expert to know the right key person insurance for your business.