This policy is mainly for people who have some specialized skills helping the business in its growth and whose loss can substantially affect the profit earning capacity of the business and they are called the key persons. Anybody who fulfills all the above requirements and conditions would come under this category, eligible for the keyman insurance policy.
Directors of the company
One or two partners of the company
Sales and marketing head
Keyman insurance can help all the businesses with one to offset the losses and continue to function the same way in the absence of these key persons.
It was found that more than 60% of the population possessed a life cover but only a 22% of the people had a keyman cover for their business. Most of the businesses had not come under this and they were left uncovered in the case of loss of the keyman in the business. But what could be the major reason for this? Lack of awareness. Yes, many businesses even today are not clear or probably do not know anything about this and hence stay away, uncovered under this policy. It is very important that all the business owners get to know about this policy and try to secure and safeguard their businesses from the evident losses in case of loss of their keyman. A survey was conducted in the US to check the popularity and importance of this keyman insurance policy among the US business establishment in comparison with the life insurance.
This policy is for the key persons in the business. There are few specifications that decide the importance of a person to the business and for him to attain the keyman position. This policy is generally given based on three categories.
Continued survival – this policy is for those without whom the business would suffer a heavy loss. This is a written confirmation to the creditors confirming that even at the death of the key person the business would continue to perform thus giving an assurance and guarantee for the amount from them.
This is taken when the business is unable to find a replacement for the keyman in the event of the death of the key person. This insurance would be required by an owner on which he can opt for loans with the LIC.
Though the last one might look a little deviated from the current topic discussed, it is definitely a reason for business people to go for this which not only financially supports them during the loss of the key person but also helps them further in a different angle for money procurement.