KEY PERSON COVER

Key Person Insurance is a type of life insurance policy taken out by a business on the life of a key individual within the company. This individual is typically someone whose expertise, skills, or relationships are integral to the success of the business. The insurance provides financial protection to the business in the event of the key person's death or disability, helping to cover various expenses and mitigate the impact on operations.

The coverage amount in Key Person Insurance is typically determined by estimating the financial loss the business would incur in the absence of the key person. Factors such as the individual's role, contribution to profits, and the costs associated with finding and training a replacement are considered. The goal is to provide a financial cushion that helps the business recover and continue its operations smoothly.

The business owns the Key Person Insurance policy, pays the premiums, and is also the beneficiary. This structure ensures that the business receives the insurance payout in the event of the key person's death or disability. The funds can then be used to cover various expenses critical to the business's stability and continuity.

While the term "key person" may vary, Key Person Insurance is typically applied to individuals whose skills, knowledge, or relationships significantly contribute to the success of the business. This can include top executives, key salespersons, key technical experts, or individuals playing a crucial role in the company's operations. The key is to identify those whose absence would have a substantial impact on the business.