Will your business survive in case some unprecedented scenario occurs tomorrow? Most businesses will avoid thinking about scenarios like this because it makes them feel uncertain and vulnerable. However, that does not change the fact that modern-day businesses operate in a very volatile environment. The covid-19 pandemic is an avid example of such occurrences. 

Therefore, businesses always need to be prepared for the worst-case scenarios, and the best way to do so is by investing in a keyman insurance policy. But how can it protect the life of your business? Continue to learn more.

What Is Keyman Insurance?

Keyman insurance is an insurance policy where both the proposer and the premium payer is the employee. The life that is being insured here is that of the key employee of the employer, and in case of a claim, the benefit will be enjoyed by the employer. 

“Keyman” in this context can be an employee equipped with some special skill sets or is the bearer of great responsibilities contributing towards the profits earned by the organisation. However, one must not mistake it to be any special insurance plan as it is very similar to life insurance with a little distinction to suffice and special requirements. 

The primary objective of the keyman insurance is to cover the life of the Keyman employee for a monetary value. This means that if the Keyman passes away, the monetary loss incurred by the business for such an instance will be borne by the insurance company. An organisation can appoint more than one Keyman or key woman. Further, one can also use such insurance policies to cover partners in a partnership firm. 

How Can Keyman Insurance Protect The Life Of Your Business?

No matter the size or scale of a business, a sudden demise or resignation of a key person can bring up many challenges. Unfortunately, this can also impact the overall business operations, ultimately rendering the business unable to operate and carry out business as usual. Hence here are some ways how Keyman insurance can protect the life of your business.

  1. Ensuring The Continuity Of The Business: In case a business suffers from the loss of losing a Keyman, it can halt all business operations resulting in severe losses. In such scenarios, the management has to be very clear about the person who is equipped with the same level of competence to replace the Keyman. However, that is much easier said than done because a continuation plan is barely a concern for any business when things are sailing smooth. So in case there is no continuation plan in place, but the remaining partners or stakeholders still want to continue the business, they can leverage the Keyman insurance policy to settle all the buying and selling complications in case of an unforeseen tragedy.
  2. Businesses Failing To Continue In The Event Of Loss Of A Keyman: In most cases, the Keyman has most of the knowledge about operating the business. This means in case of the Keyman’s demise or resignation, the organisation will lose all the key information that was imperative for running the business. Additionally, one does not become a Keyman in a day or two, which means that replacing them will not be an easy undertaking. This will certainly have adverse financial impacts on the organisation, making it far more challenging for the business to get back to normal. This is where the financial assistance from the Keyman insurance policy will play a crucial role and enhance the chances of the business sustaining itself.
  3. Future Growth And Financial Requirements: Every business needs operation and working capital to carry out daily business activities. Understandably this will be difficult to access in case of the Keyman’s demise or resignation. Therefore, one can at least get the claim amount to continue the business for the time being. In case that does not cover all the expenses, the organisation can also leverage the Keyman insurance to avail financial assistance from different banks and financial institutions. This will ensure that the business is secured for the future with enhanced longevity and stability.

Summing Up!

Every business needs to take risks every once in a while, but that does not mean that the risk is so significant that it can disrupt the business completely. Therefore, organisations and stakeholders need to be diligent enough to mitigate the consequence of any such risks at the earliest. Therefore, get a Keyman insurance policy and safeguard the business and organisation against any unforeseen circumstances.