What is Key Person Insurance?
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In most businesses, people are the main asset. They have all the ideas and knowledge and directly generate the company revenue. Without key people the business may have no value. A "key person" can be anyone within the business, not necessarily the owner. Losing a shareholder, or even a junior employee, can lead to a significant drop in profits.
Losing a key person could mean:
Being unable to continue operating;
Losing clients or damaging client relationships which can reduce revenue;
Losing knowledge such as ideas for revenue, or internal operating method;
the cost and difficulty of finding a suitable replacement;
lowering of staff morale leading to lower productivity; and
being unable to meet contractual arrangements which may incur penalties.
The potential for problems is almost limitless. An accident may incapacitate a person temporarily or leave them with permanent disabilities. Even if a key person has a partial disability it can be catastrophic for the business.