If you own a business or company, or are thinking of starting one, it’s important to know the many different types of insurance you may need to consider having. We previously discussed several types of business insurance policies, but one of the most important and often neglected is key man or key person insurance. Read on to discover what key man insurance is and how a broker can help you decide whether or not you need it.
What is Key Man Insurance?
Key man insurance is a policy that covers an important person to your business. While there is no set definition of the term, typically it is a policy that compensates the business for losses that would come from the death or incapacity of someone who is a vital member of the business or company. If a member of your company is completely indispensable in the short term and their loss would significantly impact your company, it would be wise to speak with a broker about a key man insurance policy.
It is usually a life insurance or trauma insurance policy and is used to protect the business. Unlike other forms of business insurance, the compensation for the business is not calculated based on actual losses but pays a fixed sum that is specified in the policy.
Key Man Insurance Cost
The cost of a key man policy is usually pretty affordable compared to the cost of other types of business insurance. However, this cost depends on many different factors. As with life insurance premiums, key man insurance premiums depend heavily on the age and health of the person insured. An older person or one with pre-existing health conditions may have higher premiums than one who is younger or in better condition medically.
In addition to health of the insured, a lot depends on your business. A larger, more valuable company will require a most expensive plan than usual. Price can also depend on the key person’s contributions to the business. If you decide you need more coverage, the premiums will be much higher.
An insurance broker can help you find the right policy for your business that will fit within your budget while also protecting your business interests.
Terms for Key Man Insurance
Key man insurance is typically available in terms, similar to term life insurance. Most insurance companies provides policies 10-, 15-, and 20-year terms.
It can be difficult to navigate all the intricacies of key man insurance and find the policy and coverage that is going to fit your business. If you need some help, contact the insurance brokers at FrontLight Insurance and let us help. We can find the right policy for you at the price and term that are best for you. Contact FrontLight todayor give us a call at 310-684-5799.