It’s no easy feat to start a business from scratch. Between managing daily operations and employees to handling numerous financial obligations, entrepreneurs often overlook a component that the business attorneys for our business and institutional law at Skeeters, Bennett, Wilson & Humphrey find vital. If you’re starting or already own a small business, we encourage you to consider getting key man 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 covers whoever is found to be crucial to a business: if this person was removed, the entire ship would sink. So these people need to be insured to ensure the vitality of the business.
How Does It Work?
A small business owner 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 compensation from the insurance coverage.
How Does Key Man Insurance Protect My Small Business?
Key man insurance is critical to the success of a small business because the death of a vital person can often cause the immediate death of the company. As part of a comprehensive longevity strategy, key man insurance helps your company survive the blow of losing the person essential to its core operations, rather than declaring immediate bankruptcy.
Why Do I Need to Talk to an Attorney?
There are many different ways to structure a key man policy agreement. Before you commit to a key policy, we recommend partnering with a knowledgeable business attorney who’ll take the time to learn about your business and vet the coverage best suited for it. This way, you’ll have the confidence that you’re not receiving an off-the-shelf policy that doesn’t take into consideration all the contingencies of your operation.