What Is Keyman Life Insurance?
It’s a life insurance policy that a company purchases to protect key executives’ lives. In this case, the beneficiary would be the company who will also pay the insurance policy premiums. Keyman Insurance is also known as “key woman” or “business life insurance.”
In the event a CEO or an essential personnel dies, the company’s operations typically have a large negative effect. The payout from the executive allows the company time to find a new person or implement new strategies to prevent operations to flounder.
Types of Keyman Insurance
Keyman Insurance can cover different types of scenarios:
- The keyman may be unable to work but has not died. Usually in an instance of business lost during extended absence.
- Keyman Insurance can protect profits by offsetting income from lost sales, losses resulting in the delay or cancellation of projects in which a keyman was involved.
3. Coverage can protect shareholders. This insurance can be purchased by the shareholders or partners in the event a keyman is unable to fulfill their duties.
4. Any keyman involved in guaranteeing business loans or banking facilities. The value of insurance coverage is arranged to equal the value of the guarantee.
How Much Keyman Insurance Do I Need?
Like most policies, how much insurance is needed depends on the business. Some businesses are quoted $100,000 to $1 million policies.
To determine the kind of coverage you need, company executives need to consider who is irreplaceable in the short term. Typically, this coverage protects owners of small businesses or whomever is managing the books or employees.