Business owner? 3 reasons to think about key person insurance
It’s safe to say that one of the biggest challenges that business leaders have faced over the last few years is the global Covid-19 pandemic.
No matter whether you’re managing a large, multinational enterprise or the local barber shop, the constant uncertainty that has accompanied the pandemic will no doubt have been incredibly stressful.
However, one good thing that Covid has brought us is a heightened awareness of the impact of not being able to work. Creating contingency plans is part of good business management even during normal times, but this has become even more crucial now and into the future.
While business leaders and small business owners have done an incredible job of planning around Covid-related disruption, many have yet to implement key person insurance.
The good news is, it’s not necessarily hard or expensive to implement, and advice is readily accessible.
Read on to learn more about key person insurance, and why it matters.
What is key person insurance?
Key person insurance is an agreed value cover that pays the business should a nominated staff member be unable to work for a period of time due to illness or injury.
It is designed to ensure that businesses can maintain ‘business as usual’ operations by providing funds to enable recruitment of a short-term replacement.
Why consider key person insurance?
If you can’t work due to illness or accident, key person insurance will enable you to recruit someone to fill the gap.
Many business owners hold income protection insurance, which offers peace-of-mind around your income should you suffer an illness or injury that leaves you unable to work. While this is an excellent protection, if your business requires a replacement manager while you are away, this would not be covered. Check out this great article about deciding whether key person insurance or income protection insurance is a better option for you personally – read it here.
Should one of your vital employees be unable to work, key person insurance provides for the same ability to recruit an interim staff member
Often businesses have a few select employees that are vital to the operation. Perhaps they have specialist skills to operate machinery in your factory, or vital knowledge that clients of your consulting agency rely on.
If one of these employees cannot work, you’ll be left trying to recruit for a replacement. Key person insurance covers the cost of replacing a critical team member for a short period, to an agreed value. This means you can focus on supporting the affected team member and recruiting cover, rather than worrying about affording to pay out sick leave in addition to another salary.
Key person insurance isn’t just for Covid-related illness – it’s a long-term strategy for protecting your business interests
Putting measures in place to protect your business if you or a key employee can’t work due to Covid-19 or one of its complications is a very sensible idea.
However, it’s also important to consider how key person insurance could protect your business in the long term. That way you can rest assured that your business has far less vulnerability around key people’s availability to work.
The global pandemic has given many business leaders pause for thought around the topic of business continuity planning. While this has likely caused sleepless nights, one of the silver linings is that that the need to improve business continuity plans will inevitably result in a more resilient business in future.
Interested in learning more about key person insurance, and whether it’s a good solution for your business? Get in touch with your Plus4 adviser for a no obligation chat.
Don’t have an insurance adviser? Plus4 advisers are focused on finding the very best insurance for your needs; we only recommend policies that we have researched thoroughly, to ensure they meet our high standards for cover. You can find your nearest Plus4 adviser here.