When you operate a business, there are many types of insurance that you need. Some insurance policies are required by law, such as automobile liability insurance or workers’ compensation insurance. Other types of insurance are a wise investment to protect your business, such as liability insurance and property insurance. Our South Carolina business attorneys can help you review your insurance options, including whether you may need key person insurance coverage for your company.
What Is Key Person Insurance?
Most companies have at least one or more key employees that would be difficult to replace, especially if they died suddenly. It would take time to find suitable replacements, train the replacements, and return to normal work routines. The process can be costly, especially if the company loses clients and customers during the transition.
Key person insurance helps cover the cost of replacing key employees after a sudden death. It is a life insurance policy for top employees in a company. The proceeds of a key person insurance policy can be used to pay for the recruitment, training, and development of a new employee. The proceeds can also be used to help reimburse the company for financial losses that might occur because of the death of a key employee.
How Do I Know if I Need Key Personal Insurance Coverage?
Any company can benefit from key person insurance coverage. The loss of a key employee is never easy for a company. Large companies often cross-train to help reduce the impact of losing an employee. However, a small business that depends heavily on one or two key employees could be devastated if one of those employees suddenly dies. The death of a key person could threaten the company’s financial stability.
Some circumstances that might indicate the need for key person insurance include:
- Partners who want to ensure they have sufficient funds to purchase the other partner’s interest in the case of the partner’s untimely death.
- An employee, such as a salesperson, whose sudden death could lead to an immediate decrease in company revenue.
- There are no other individuals who could step into the role of the key employee.
- Sole proprietors who want to ensure sufficient funds to pay debts of the company or continue the company until employees can find other work.
- You have a specialized employee that is crucial to the business, and it will take time to locate another employee with the same skills and expertise.
- Your company relies on one person to generate most of the company’s revenue.
There could be many other reasons why your company could need key person insurance coverage.
Purchasing Key Person Insurance Coverage
You can purchase key person insurance policies from a variety of companies. The cost of coverage, types of coverage, and policy limits vary depending on a variety of factors. It is advisable to speak with several insurance companies to compare costs and coverages. As with any insurance policy, it is important to read the entire policy to ensure you understand the exclusions and limitations before purchasing the policy.
Contact a South Carolina Business Attorney for Help With Your Business
A South Carolina business attorney can help you with a variety of issues related to your business, including business succession plans, contracts, litigation, taxation, and compliance. Do not wait until you need legal advice. Get legal advice now to avoid problems and issues that could be costly and time-consuming. Contact Willcox, Buyck & Williams, PA for more information today.