You may not have thought about it, but if you, a partner or a key employee in the business were suddenly unable to work because of illness, injury or death, could your business cope?
Used by both large companies and SMEs, Key Person Insurance (also called Key Man Insurance) provides financial support for families and your business against lost revenue, profits and the capital value should a key person in your business succumb to the unforeseen.
Key Person Insurance is a type of corporate-owned life insurance whereby an employer may take out a Key Person Insurance policy on the life or even the health of an employee whose knowledge, work or overall contribution is considered uniquely valuable to the company. Usually, the amount of cover is determined by the size of the business and the contribution and importance of the person insured.
This is done primarily to offset the costs of hiring temporary help or recruiting a successor and the subsequent losses in trade/sales which an employer may suffer in the event of the loss of a key person.
Incredibly, of the more than 11,850 Australian SMEs (2-19 employees, turnover less than $40m), only 6% have Key Person Insurance*.
*Source: DBM Business Financial Services Monitor. Surveys conducted Feb 2013 to Jan 2014.