Losing a key person – like an owner of a small company, or a senior executive or director – can be devastating for any company.
Not just in terms of the personal loss and tragedy of losing them, but from a business perspective it could have immediate consequences that could threaten the financial future of the company.
It could be loss of sales and revenue in the short-term, missing long-term revenue goals due to losing key client relationships, to dealing with increased costs – or even the immediate repayment of loans.
All these things can threaten a business’ future, and all can happen as a result of losing a key person.
In these situations, you need a financial safety net that can at least help your business survive through a personal tragedy.
This is what keyman insurance is for.
In this guide, Jeremy from Rigby Financial outlines what the benefits are of taking out keyman insurance for your company.
Click here – 5 Tips For Decorating The Baby’s Room
1 – Protect against the loss of a key person
A key person is essentially anyone whose loss from the business could disrupt the company or put its financial position at risk, whether it’s loss of revenue, increasing costs, or loss of a specialist skill.
Losing one of these key people could result in lost revenue from loss of sales and missed revenues or potential loss of clients.
Keyman insurance can protect you against these losses by providing a payout that can cover the short-term losses (and cover any immediate extra expenses) to help the business navigate what will be a difficult period.
2 – Protect your short-term finances
In the short-term, losing a key person has the potential to seriously hurt a business’ financial position and could put its longer term future at risk.
It could be lost profits from lost sales the key person would have delivered. Or lost revenue from customers who were only at your company because of their relationship with the key person.
It could be lost revenue from delays in product development if you lose a key or senior engineer or developer. Or it could be extra staffing costs for training, or recruitment fees.
Whatever the losses or additional costs, keyman insurance can help make sure you have the finances to navigate the immediate loss of a key person, without putting the business’ future in jeopardy.
3 – Cover outstanding debts
While a business is likely to have business loan insurance to cover the costs of outstanding debts linked to a key person (whether it’s a mortgage on a commercial premises, or funding for new equipment) a loan provider may also accept keyman insurance in lieu of business loan protection.
It can ensure your business gets the money it needs to repay any outstanding loans or debts, without dipping into its capital reserves.
Remember, these debts and outstanding loans could be substantial, and needing to repay them immediately could put a lot of strain on the business’ finances.
Click here – What Will Happen At The Immigration Medical Examination
4 – Cover any training or recruitment costs
If a key person in the business dies the last thing you’ll want from a personal level is to think about replacing them immediately, but it will have to be done.
And this can get expensive very quickly.
This is because key person insurance is typically taken out on very senior, highly successful or niche skilled employees. And these roles are expensive to replace, especially if you use recruitment agencies.
Plus, it’s not just base salaries you’ll have to account for, you might end up being forced to increase a benefits package to entice a new employee.
Even if you decide to train someone up from within the business, this is still going to be expensive, and you’ll lose the experience over time until the employee has the same level of experience.
5 – Protect the long-term prospects of the business
Losing a key or high performing employee will have immediate, devastating effects on your company from both a personal standpoint, as well as a financial one.
Not only will you lose the skills and experience, there’s also potential loss of revenue and future lost sales that you have to contend with. If you lose a skilled product developer or engineer, you also have to consider how this will impact your future plans.
With keyman insurance cover, you can at least remove the financial worries from your list and ensure the immediate financial position of the company can withstand the loss of a key person.
Ensuring business is prepared for the worst case
Keyman insurance cover can often be overlooked in businesses, but it provides a much needed safety net that protects a company in the short and long-term against the implications of losing a key member of staff.
Losing someone so vital to a company can have huge repercussions that could damage a company immediately, and in the long-term.
At least with key person insurance, owners don’t have to be concerned as much about the financial impact of what will already be a highly upsetting and challenging time.