How to Choose the Right Key Person Insurance for Your Business

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.

Capital Protection

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.

Buy-Sell Insurance

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 in Perth, Western Australia, then contact Absolute Insurance to chat with an expert to know the right key person insurance for your business.

Reviewed by Greg Maguire

Greg Maguire reviewed this article to make sure the information is accurate and reflects current insurance practice. It is general advice only and does not take your personal circumstances into account.

Greg Maguire is an Authorised Representative (No. 255354) of AD Advisory Services Pty Ltd, ABN 68 005 830 802, AFSL 237058.

Greg Maguire

Principal

Greg Maguire is the founder and principal of Absolute Insurance, a family-run Perth life insurance broker he runs with his wife Steph. Greg has spent more than 20 years helping Western Australian families and business owners protect what matters most, with life insurance, income protection, TPD and trauma cover from Australia's leading insurers.

Before insurance, Greg was a primary school teacher, and that same patient, one-to-one approach is how he still works today. He takes the time to understand your situation, explains your options in plain English, and stands beside you and your family if you ever need to claim.

Greg holds an Advanced Diploma of Financial Planning from Deakin University and a bachelor's degree from Edith Cowan University. He is an active member of the local community through the Chamber of Commerce and Industry WA and Baldivis Rotary.

Greg Maguire is an Authorised Representative (No. 255354) of AD Advisory Services Pty Ltd, ABN 68 005 830 802, AFSL 237058.