Key person insurance helps protects your business should the owner or another key employee pass away.
Often in a small business, one or two people genuinely keep the business running. It may be the owner, founder, or a critical employee. This person is typically so crucial to a business’s function that if they were to (poof!) disappear one day, the business could fall apart.
Key person insurance coverage gives your business a cushion from financial losses should a person’s death happen.
Think of it this way – key person insurance is essentially a life insurance policy, but the beneficiary is your business.
Key person insurance is there to ensure your business doesn’t go under without you. If you’re the owner, you’re probably the one who keeps everything together. You know the password for the internet router, are the top salesperson and know details for filing your income tax return.
Without you, the rest of your employees might struggle to continue your business. With the payout from a key person insurance policy, your business could:
Like any insurance policy, the premium you’ll pay for key person insurance depends on a number of factors. Some of the most important ones are:
Of these factors, the only one you can really control is how much you want the policy to pay out. To determine the amount of coverage you need, consider these three questions:
Of course, should the worst come to pass, you may decide that your business can’t go on. In this case, key person insurance can help you avoid bankruptcy and be used to pay off debts, distribute money to lenders, give severance benefits to your employees and close your business down in an orderly fashion.
So what happens if the insured employee quits the company? There are three common possibilities for a business:
Key person insurance is really only for the most critical members of your business — those with specialized knowledge or training, deep connections in your industry or irreplaceable skills.
If you feel your business would come to a stop without a particular employee, it might be worth looking into key person insurance.
Or, If you’re the key person in your business and want your business to outlive you, key person business insurance can ensure your team has the resources to carry on.
At NEXT, we don’t sell key person insurance, but we think it’s important you have all the information you need to run your business successfully.
That’s because we’re 100% dedicated to small business and want to give you the tools to take yours to the next level.
We encourage you to check out our simple and affordable small business insurance policies.
You can start a quote, customize your options and access your certificate of insurance online immediately — in about 10 minutes.
Business insurance is divided into different policies. We offer seven types so it's easy to design the coverage that fits your business.