It is hard to imagine what would happen to your business you spent your entire life building up from a small one-man show to a successful enterprise should you die or are no longer in a position to run your operation if you are disabled or succumb to a debilitating illness that prevent you from carrying on in the same vein you have been used to; in other words, key man insurance has been designed to assist should you no longer be in a position to carry on running your business.
To sum up a key person is an individual who is important when it comes to skills and expertise in running either a one-man show or an individual who is “irreplaceable” in a company – someone who contributes hugely in the success and profitability of running a business; key person insurance will endeavour to replace the person who has either died, become ill or been disabled and ensure that the loss has as little impact on the running of the operation as possible.
- It is not uncommon for a business to suffer losses should someone who is fundamental to the running and profitability of an enterprise to suffer financial losses – replacing those skills and knowledge could prove to be difficult.
- Sometimes when someone is not as skilled as the person who needs to be re placed, the new individual or employee will be up-skilled or head-hunted from a competitor; this costs money and takes time while the profitability of the business might be jeopardised – it is important that there are enough resources to see a business through a transitional period.
- In some instances businesses will be wound up should a replacement not be found – this does and can cost a considerable amount of money.
- Key insurance can be used to settle a loan that a business has that is still outstanding at the time of death, illness or disability.
Proceeds from Key Person Insurance will be paid out to the business, which will be used where the business needs it most.