Key Man Insurance – Whether to Have One

There is always
some kind of risk when you are running a business and many businesses do have
property, stock or other kinds of insurance, but they don’t think about the
risk of losing one of their main employees. Losing a key man to accident or
illness often means quite a financial loss to the business that could last over
several months if not years. And if the loss was permanent – i.e. the employee
died or was unable to resume his duties, an additional cost would be incurred
through the process of hiring a replacement and waiting until the new employee
got up to speed.

The best plan to
take care of this risk is to have key man insurance. While having extra
insurance premiums to pay may be seen as just another burden, key person insurance is often
tax deductible, thus taking some of the pain out of having to pay those premiums.
When the insurance policy is taken out to compensate the business for lost
earnings, then the premiums are usually tax deductible. But it is a good idea
to consult with an accountant just to make sure.

When
a key employee cannot continue to work through accident, illness or death, the
burden of financial loss to the business will be a great deal less if the
business has insured him or her with key person insurance. No business wants to
suffer a financial loss even for just a little while.  But when a person is ill or injured, recovery
usually takes several weeks – maybe longer. During this time the income that
such a key person produced for the business will be missing. But with key man insurance to replace it, the
company can continue to forge ahead instead of languishing. Insuring against
the risk of loss is always a wise move.

Additional articles about key person insurance

About the author

Patrick White is an Insurance Advisor with an experience of more than 15 years.

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