It’s no easy feat to start a business from scratch. Between the saving, the planning, and the many payments that are necessary, entrepreneurs often overlook a component that the business attorneys at Skeeters, Bennett, Wilson & Humphrey find vital. If you are starting or already own a small business, we encourage you to consider getting key man insurance.
Here, we answer the most common questions we get about this type of insurance:
- What is key man insurance? Key man insurance is simply life insurance on the key person in a business, usually the owner. Sometimes this extends to the founders or perhaps a key employee or two. Basically, it is whoever is found to be crucial to a business. If this person were removed, the entire ship would sink. These people need to be insured for the sake of the business.
- How does key man insurance work? Key man insurance works when a company purchases a life insurance policy on the key employee, pays the premiums, and then becomes the beneficiary of the policy. If by some unfortunate circumstance, the key person dies, the company receives the insurance payoff.
- Why do I need key man insurance for my small business? Key man insurance is important to a small business because the death of a vital person can often cause the immediate death of the company. Key man insurance would help your company survive the blow of losing the person who makes the business work, rather than declaring immediate bankruptcy.
- Why do I need to talk to an attorney about key man insurance? There are many different ways to structure a key man policy agreement. When you are considering policies, we recommend talking to an attorney to make sure all aspects are well taken care of.