What is Key Man Life Insurance?

All of us know the importance of parents in our lives. They provide us economic, mental, emotional and physical security till the time we become capable to look after ourselves. After the death of a parent or a prime bread earner, the whole family is thrown in turmoil. Similar is the case with business. A sudden death of an important employee in the organization leaves the company in a chaos.

To deal with this setback, most of the businesses these days are obtaining key man life insurance. Key man insurance is suitable for all kinds of businesses, whether big or small.

Key person or key employees are valuable to any organization. Sudden demise of a key person can cost a company highly. A consultant might be required to look for a competent person to take the place of the deceased. After his recruitment, he will have to undergo a training process to understand how the organization works and what will be his role in the organization.

A key person is usually at a high position, for instance, he might be one of the directors, networking manager, sales manager, etc. He has a major role in the growth of the company and his death is a severe blow to the organization. So dealing with this loss becomes a company’s major concern.

Key man insurance makes sure that the organization does not have to face any kind of financial hardship in the absence of a key person.

Term Life Insurance for Key Person

Any type of life insurance can be purchased to insure a key employee. But for small and medium sized businesses, term life insurance might seem to be the best option. Term life insurance is the most affordable life insurance.

The employer will not have to shell out higher premiums for a term life insurance policy. He can obtain term life policy for 15-20 years to insure key person/persons. If the person dies while the policy is still in force, the employer will receive a death benefit. With this money, the employer can sustain the organization’s operations and get rid of any financial liabilities that might have come after the demise of the key person.

Need for Key Man Life Insurance

Other than finding a replacement for the key person, key man life insurance money can also be used to finance any kind of reshuffling that the business might require. Recruiting new or additional man power always requires funds.
A small or mid-size company does not have overflowing funds. This is where key man insurance comes in. It helps you cover all the expenses that are related to finding, hiring and training the personnel. Key man life insurance can be used for paying off creditors and for buying or selling the deceased’s shares.

Since human resources are such an integral part of an organization, it is imperative that ample measures are taken to secure the future of the company. Key man life insurance is one-in-all tool that shields your business from all kinds of financial strains.