Key Man Insurance
When you take out key man insurance, you’re effectively insuring your business against the loss of someone vital to your business. It could be you, your business partner or anyone else you want to name.
How does it work?
It works like a life insurance policy. Except you cover the life of the key person in your business rather than someone on a personal level. If that key person passes away, the policy will pay out a lump-sum, just like a normal life insurance policy would. Some policies will also pay out if the named person becomes terminally ill or suffers a long-term disability and can no longer work in the business.
What are the costs?
The premiums are worked out in the same way as traditional life-cover. They take into account the key person’s age, health and lifestyle as well as the amount and level of cover needed. They only difference is that the business pays the premiums and receives the pay-out.
Cover is usually set at a multiple of the person’s salary, the amount of profit or turnover they generate for the company, or as a sum the business thinks is needed to find a replacement.
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