Is Keyman Insurance And Key Person Insurance The Same?
Companies across Australia use both keyman insurance and key person insurance to
describe a specific type of policy targeted towards businesses for financial protection.
This type of cover provides a business with financial protection should an 'essential employee' suddenly become ill, injured, or dies and can no longer work.
In Australia offers similar protection to those offered to individuals, namely:
*Life insurance;
*TPD insurance;
*Trauma insurance; and
*Income protection insurance.
What type of business would keyman or key person insurance benefit?
Both businesses large and small would benefit from keyman cover. Could your business survive if one of your key employees were suddenly unable to work due to serious illness, injury, or even death?
One of the most important things to note is structuring your policy correctly. Doing this can make a huge difference should the worst happen, and can make claim time less stressful. The structure of your policy may depend on the ownership structure of your business.
Speak to a financial adviser on how to correctly structure your key person insurance policy.
Isn't keyman insurance the same as business succession?
No. Business succession is an important part of a business's financial protection. However it only protects the business owners by managing the transfer of ownership.
On the other hand keyman insurance protects the business itself by paying a benefit due to the loss of expertise from a key employee. The proceeds can be used in a variety of ways, although it is typically used to maintain the business's capital value and stabilize the business.
How do you measure the loss of a key person in monetary terms?
It's not an easy thing to put a dollar value on the loss of a key employee. One way which is often used is to calculate a percentage of the business's capital value and annual capital appreciation attributable to the key employee. Having said that, keyman insurance can be difficult to compare on your own, so seek the advice of a financial adviser.
Getting advice on this type of cover can be costly, however looking online can save you time and money. You can compare keyman insurance quotes for free, and get advice on how to best structure your policy.
by: Grant Main
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