Key Man Insurance
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In general, Key Man Insurance can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy. The policy’s term does not extend beyond the period of the key person’s usefulness to the business. The aim is to compensate the business for losses and facilitate business continuity. Key Man Insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.

There are four categories of loss for which Key Man Insurance can provide compensation:

  1. Losses related to the extended period when a key person is unable to work, to provide temporary personnel and, if necessary to finance the recruitment and training of a replacement.
  2. Insurance to protect profits. For example, offsetting lost income from lost sales, losses resulting from the delay or cancellation of any business project that the key person was involved in, loss of opportunity to expand, loss of specialized skills or knowledge. 
  3. Insurance to protect shareholders or partnership interests. Typically this is insurance to enable shareholdings or partnership interests to be purchased by existing shareholders or partners.
  4. Insurance for anyone involved in guaranteeing businesses loans or banking facilities. The value of insurance cover is arranged to equal the value of the guarantee given by the key person.

A Key Man can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, they could be: a Director of a company, a Partner, key sales people, key project managers and people with specific skills or knowledge which are especially valuable to the company.

Key Man Life Insurance

Contemplating the death of company leaders is pretty dismal subject matter. But think of the consequences - businesses have ‘gone under’ due to the death of just one employee. Key Man life insurance is an affordable way to keep your business solvent after a critical employee passes away.

Key Man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout.

The founder or owner of a business shouldn't immediately be considered the right or only candidate for a key man life insurance policy. Rank is less important than who the critical employees in your business are. Your business couldn't function day to day without the founder, but it also may not be able to survive without your revenue-generating sales team or without the precious relationships a business development employee has with your vendors.

Key Man Disability

Key Man disability policies are not readily available with traditional disability income insurance providers so unlike individual disability income polices, they have limited policy features and options. In most cases, these policies are custom designed, within contractual guidelines, to meet specific company needs. These policies are very short term in nature as it is assumed that a capable replacement can be found within 12-24 months. In the event of a claim, there are two benefit payment options: a monthly benefit and an annual lump sum benefit.

Monthly benefit payout. The monthly payout option states that after the initial, elimination period of 30-90 days, benefits are payable at a monthly stated amount for the life of the key man disability policy which is usually 6-24 months depending on the company’s need.

Lump sum benefits payout. The lump sum benefit payout option requires a longer elimination period, usually 365 days before disability income benefits are paid. At that time, if the key employee cannot perform the regular and substantial duties of his regular occupation, the lump sum benefit is paid to the company and the policy terminates.

The monthly benefit or lump sum benefit amount is determined by a number of factors including the income of the key executive, the replacement costs associated with hiring and training a capable replacement and the key person’s contribution to the company’s earnings. Financial documentation to support the need for Key Man disability insurance will be required for every case.
Physical Address:  28 Barkley Circle Ft. Myers, Florida 33907
Mailing Address:  P.O. Box 62487    Ft. Myers, Florida 33906-2487
Ph:  239.278.3939 Fax: 239.278.4853