Insurance Gyan: Keyman Insurance

Keyman insurance, also known as key person insurance, is a type of life insurance designed to protect a business financially in the event of death of a critical employee.

Here's how it works:

• The business takes out a life insurance policy on a key employee, someone whose skills or experience are vital to the company's success.
• The business pays the premiums on the policy.
• If the key employee dies, the business receives a death benefit from the insurance company.

Who should buy keyman insurance?

This type of insurance is a good fit for businesses that rely heavily on the contributions of a few key individuals. Here are some examples of key employees who might be insured:

• Owners or founders
• Top executives (CEO, CFO, etc.)
• Salespeople with a strong track record
• Scientists or engineers with specialized knowledge
• Anyone with unique skills that would be difficult or expensive to replace

Benefits of keyman insurance:

• Provides financial stability in the wake of a key employee's death
• Helps cover costs associated with recruiting and training a replacement
• Mitigates potential loss of profits or clients due to the employee's absence

If you're a business owner and you're unsure whether keyman insurance is right for you, it's always a good idea to consult with a financial advisor.