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Why Do You Need To Provide Insurance For People As Well As Your Business
Aug 30, 2018

With only half of all small businesses surviving five years or longer, you should take every precaution to protect the growth and success of your own small business.

Fittingly, ninety percent of small businesses report having property and liability insurance,according to a riport by the National Association of Insurance Commissioners, and nearly half of small businesses even have commercial auto insurance.

But the same survey reports a troubling statistic: only 22% of small businesses have key person life insurance, although 71% of the owners or managers surveyed agree their business relies heavily on one or two key people. Even fewer small businesses have key person disability coverage.

This oversight could leave small businesses vulnerable to major losses and even total failure in the event of an accident.

CROWNWAY COMPANYthink have key person life insurance is a wise decision.


What is Key Person Insurance?


Key person insurance (sometimes referred to as key man insurance) is a type of policy that a business can take out on an employee whose untimely death or disability would significantly hinder the success of the business.

Key person insurance is distinct from the typical life insurance policy that is purchased by an individual to cover themselves or a loved one. Key person policies are usually owned by the business where an individual works, used to benefit the business rather than the individual’s family.


Why Does Your Small Business Need Key Person Insurance?


Larger companies may not need key person insurance because the weight of their success tends to be more evenly spread across numerous executives and employees, many of whom can step in to fill the role of a key person who has died or become disabled unexpectedly.

On the other hand, small businesses are built on the shoulders of a few people, if not only one or two. The sudden loss of one of those people is much more likely to throw the whole business off-balance, whether because of a loss of revenue, heightened scrutiny from shareholders, or challenges of continuity and logistics.

The exception here is when a small business comprises only one employee—you. If you are the only person in your business, personal life insurance should suffice to compensate your family.


Who Counts as a Key Person in Your Business?


In short, a key person is anyone whose absence would cause your business to grind to a halt, or experience a significant loss. That person might fit one of these descriptions:

  • *An owner who wants to take out an SBA loan

  • *A founder or co-founder whose reputation or name is tied to the business

  • *A top performer whose clients might take their business elsewhere

  • *An owner who has their hands in many parts of the business and whose intimate knowledge of the company would be irreplaceable


How Much Key Person Coverage Will Your Business Need?


Key person insurance policies can vary in coverage, but the face value will often range between five to ten times the covered employee’s earned income. To settle on a number, first determine the percentage of income this key employee contributes to the business. Then multiply by the length of time you anticipate needing to find a suitable replacement.

You can estimate how long you will need coverage on this person by calculating how many years they have left before their expected retirement date, then opt for a term life policy that will last until that date.

As the owner of a small business, it’s your job to protect your company and your employees, and one way to do that is to prevent unnecessary upheaval after unexpected accidents. By insuring not only your business but also the most crucial people in your business, you can avoid excessive turbulence.

Everyone needs protection, not only from themselves but also from companies, society, and countries. This can be more stable from small to large,Get a better atmosphere to make a bigger contribution.

CROWNWAY COMPANY




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