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Key Man Insurance: Extra Protection for your Business

May 7th, 2018

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Personal life insurance provides peace of mind for your family in the event of a tragedy and is a fairly well-known coverage. A lesser known coverage for your business, but one that also provides peace of mind, is Key Man Insurance.

With personal life insurance, the policy owner and insured are the same person. In the event of death, it provides monetary benefits to the insured’s spouse, children, or other designated beneficiary. By definition, “personal life insurance policies can be designed to act as an investment or to act as a protection policy; both act to protect the security of the beneficiary which is primarily the family”.

Key Man Insurance adheres to the same philosophy of providing financial protection in the event of death, but the difference is the beneficiary. With this coverage, the insured is the “key” person, but the company owns the policy and is the beneficiary.

Why take the extra step and insure “key” employees?

How will your business be impacted if you were to lose a “key” employee?

Key Man coverage is important because often these employees are essential in keeping your business running smoothly. “Key” employees are those who have the knowledge and/or leadership skills crucial to a business’ financial success. If something happens to this person, it could have a negative impact on the profitability of the business and cause financial strain. These employees could be owners, directors, leaders, intellectual property specialist, etc.

Anyone in a position where their loss would be impactful on your business is considered “key” and the expense to replace these key employees is high. According to statistics, businesses can spend upwards of 200% of annual salary to replace a valued employee. For example, replacing a $200k CEO would costs your business approximately $413,000.

In addition to the financial aspect, recruiting, interviewing, onboarding, training, not to mention moral and cultural impact, all factor in when replacing a key employee. Often the investment is not just money but time.

Review your key people and determine if your business will be financially affected in the event of their loss. If yes, we recommend you speak with a knowledgeable broker about procuring Key Man Insurance. It’s an investment in both your employees and your business.

Brown & Brown is the 6th largest insurance intermediary in the country. More than 75 years of success has enabled us to identify new opportunities, adapt our solutions and services to meet changing market demands, and satisfy the various needs of our customers. Backed by national strength and local presence, with over 300 locations and 8,500 teammates strong, we have solutions to fit all your insurance needs.

This is Part 1 of our “Key Employee” series. Click for Part 2 – Executive and Key Person Disability Insurance.

Michelle Ross

Marketing Manager, AINS, CISR

With 30 years insurance industry experience, Michelle manages Brown & Brown’s internal marketing department, overseeing the placement of property & casualty coverage with compatible insurance carriers.

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