Why Buy Key Man Insurance?
There are many reasons why purchasing keyman insurance can be beneficial for a business. First, the loss of an owner, founder, or top-producing sales rep can have a substantial impact on the overall incoming revenue of the company.
This is particularly the case in a small or medium-sized business – and in some instances, the loss of the key person could even mean that the continuation of the company is at stake.
Likewise, losing a key person to death or disability could also mean that customers may choose to take their business elsewhere.
Key man coverage can also help with funding a buy-sell agreement so that the remaining owners or partners will have the funds that are necessary for buying out the disabled or deceased individual’s share. Without this funding, though, it could be necessary to sell the company, or for the company to go out of business.
If your company relies on (or will rely on in the future) loans or other financings to grow, the loss of a key individual can be a factor in whether the company is approved. But with key person insurance, the risk to the lender can be greatly reduced.