In short
Key person insurance protects a business if something happens to someone it relies on heavily, such as the owner or a hard-to-replace employee. Most policies allow up to three people to be covered. Benefits can include death, total disability and elective surgery, generally where the person is out for at least 30 days, or 90 days on some policies.
One of the most important types of business insurance is known as key person insurance. Although not talked about that much, losing a person who does a lot for a small business suddenly can cause a lot of issues. This is when this type of insurance can kick in and protect a business.
Why Have Key Person Insurance?
When a business only has a smaller amount of employees, chances are the business owner, and a least a couple of the employees, are extremely important. They are relied on so much that if something were to happen to one of them, it could cause the business to fail. Key person insurance is designed to protect those businesses if something bad happens to one of those key individuals.
Most policies are going to allow up to three people to be protected. A business owner is almost always going to include themselves unless they are extremely passive when it comes to the success of the company. After that, employees who are either at the executive level or those who have a specific skill set that is nearly impossible to replace, are usually listed on the policy.
Like a lot of insurance policies, one of the major benefits of this coverage is to have peace of mind as a small business owner. Even successful businesses that have a small number of employees are just one disaster away from potentially failing. This is an important policy to have to protect against that. These insurance policies can be tailored quite a bit to fit specific needs for business owners as well.
What Does Key Person Insurance Cover?
Benefits for key person insurance include total disability, elective surgery, death and more. Basically, anything that could keep a key person out for at least 30 days (with some policies, 90 days) will be covered with this type of insurance.
Once the insurance kicks in, KPI can provide a lot of benefits for the business itself. It does a good job of keeping things going to business as usual, as much as possible. Also, the insurance policy can be combined many times with other insurance policies to reduce costs associated with it. Upgrades are given after a set amount of time too, which is perfect for a policy like this that is really designed to cover for a specific type of disaster.
Also read: Key Person Insurance FAQs
Key Person Insurance in Perth
Most businesses hopefully never have to use this policy. If something bad happens though, this could be one of the most important types of insurance to have. It protects the most important people of the business, keeping small businesses from turning south in a hurry. Consult Absolute Insurance today. They provide a client-focused solution to a range of insurance services for businesses in Perth.
Related Post: Choosing The Right Key Person Insurance
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.
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