A KeyMan insurance is really important for every company. If you have employed someone whose contributions are key or vital to your business, have you ever imagined what could happen to your business if that person dies or becomes disabled to work? In case of unfortunate and untimely death of the key man in your business, your business can take a hit. It can affect your sales turnover and the profits. Keyman insurance helps in such a scenario. The impact on the business of the loss of a key employee through either death or disability is covered by KeyMan Insurance.
Keyman insurance helps businesses in dealing with loss of sales turnover, loss of the Knowledge possessed by the person, additional cost to be incurred in recruiting and training a replacement and Loss of good will among customers due to the lost of a Key person.
Let us find out who a KeyMan in your business is:
Any person, employed by you, who handles a key role in your business and whose contributions are very crucial to your business, is a keyman. They are people who are irreplaceable in the short term and whose absence could even result in the sinking of your business.
You should cover your Keyman till his retirement date. A keyman remains valuable to the business only during the period when he is in service with the business. As you are aware of a certain date of his separation from your business, i.e. the retirement date, you will be in a position to make a replacement ready by then. What could happen if your keyman dies, during his tenure with you? It is unexpected; you aren’t ready with a resource to replace him. This is when Keyman Insurance helps.
Keyman insurance is not an Insurance product. When a business in South Africa takes a policy covering its key man, it is known as Keyman Insurance. A keyman insurance is owned by the business and will be the beneficiary also be the business itself. The insured person will be the key employee. The proceeds will be paid to the business in the event of death or disability of the employee. You can take a combination of Term Insurance and Disability Insurance to cover the risk of death and disability of the key man. These are cheaper too.
Now that we have identified who a keyman is and what is the purpose of keyman insurance, we need to understand how to choose the level of coverage required. The level of coverage should be derived based on analyzing the below:
- The impact of the death of the keyman on your business profits
- The cost to be incurred in hiring a new person as replacement
- The cost to be incurred in training the new resource
- How soon can your business be back to normal, if you lose the keyman.
Keyman Insurance is a vital insurance product for any business that has certain people who are key to their business. It helps the business to continue doing the business without affecting its profits even in case of death or disablement of such keymen.