In small companies, the founder, CEO and certain executives play very key roles to the point where their absence would result in serious financial repercussions. Their sudden demise may lead to:
- A huge hit in the company’s profits
- Significant costs in hiring someone else for the role
In such cases, Key Person Insurance can come to the company’s rescue.
Key Person Insurance is basically a Term Insurance policy that a company purchases on the life of an employee they cannot do without. In this case, the company pays the premiums and receives the death benefits.
The money can then be used to recruit and train a replacement, or even shut the business down in an orderly way in case they cannot continue operations without the key person. No death benefit is paid if the insured survives the term of the policy.
Your employees may also decide to leave your company if they win a lottery! Learn more about how you can protect yourself from such a loss here