Key Man Insurance

Key Man Insurance: What is my business and skillset worth to my employees and clients?

We can all agree that great ideas for a business start off with a simple thought, change, or skill set that a business owner has the ability to perform well and deliver.   Many ideas require certain skill sets or talents that only few people have so the question is: how do we protect that? Key man Insurance provides financial protection for a business in the event of a loss that would arise from death or an extended incapacity of a member of that organization whose skill set is essential and dependent on that single person (who is not easily replaced).

Along with protecting your core, there are a few other reasons to have Key Man Insurance.  If you have a Partnership with a partner(s) whose beneficiary would not want to take part in the business operations or lacks the skillset that you would need, then Key Man Insurance can provide the means to buy out the disabled or deceased partner allowing the remaining partner to maintain direction and control of the business.  Our last scenario before we look at an example is more practical regarding bank loans.  Banks will almost always ask for proof of a Key Man Policy when you apply for a business loan. You cannot blame them for having a concern for the financial health of their investment.

Let’s look at an example of where Key Man insurance is a great fit:

Dan has an IT and accounting business that specializes in the Dairy industry.  Josh is Dan’s partner and has the rights to a piece of software called Boxless solutions in which he is the only administrator to the program.  Both of them are very specialized in their industry and manage a large portfolio of clients along with about 40 employees.  Aside from tax season, their busy season is around the beginning of the 4^th quarter when milks major activity tends to slow down.  They both estimate that the absence of either partner would lead to a substantial financial loss especially if they are disabled during their busy season.  Furthermore, Russ is Josh and Dan’s brother who is a physician and the beneficiary to all that they have whom has no interest in running his business. Both exposures give the partners substantial reasons to have Key Man Insurance.

There are many reasons to consider Key Man insurance and we would love to discuss your Key Man Insurance needs.

For more information, please call or email us at contact@coverica.com.