Building an Idea may be solo work, however building a business is all about teamwork. In the team there are key are always some members who play a key role in the development of your business. These people are the biggest asset of your venture and something happen to them it can seriously dampen your organization’s future prospect. Hence it utmost important to take insurance for those key people and this is what key insurance is all about.
So who are Key people?
Simply those people who hold a lot of importance for the continuity of business and its future prospects. It may be the Director, Partner, Project Manager, or Key Sales Manager. So what is key insurance policy? Getting key people of an organization insured is called a key insurance policy.
Importance of the key Insurance policy is not that it makes you secure but it can hold losses and give you a time to fill up the gap.
Insurable Losses:- What you can ensure
- Losses related to the period when a key person is not able to work due to temporary
- Insurance to protect profit during that period in the form of lost sales, Delay or cancellation of work orders or loss of opportunity
- Insurance to protect shareholders or investors’ interest
- Insurance to lenders and bankers interests
What are the advantages of key insurance policy?
The key insurance policy provides a safety measure against the losses and damages a company may suffer if an important (key) person dies unexpectedly.
Importance of key insurance:
To understand the importance of key insurance, it is vital to understand how key insurance works.
The insurance worth of a keyman has been specified in the following points:
- Five times the average net profit of the company for the past 3 years
- Two times the average gross profit of the company for the past 3 years
- Ten times of the keyman’s yearly compensation package.
Who will receive the insurance claim?
There are various arrangements, however, generally, the benefits are received by a business
Now the question is why you need an expert to buy the policy. Here are some possible reasons.
- To assess the Key personnel and impact on business due to their presence and absence.
- To Assess the impact on profitability and continuity
- To assess the value of key insurance