• Who is the key person?

    This individual has the knowledge, inspiration, creativity, and the skills to personally see the growth and development of the business.

  • How to identify the key person?

    The key person has the caliber high enough to make the difference. It is vital for the company to either recruit ...

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Insure The Key. He’s The Man

A Key Person does indeed hold the key to the business. He is the person who is vital to running the ship and is not easily replaceable. Finding out who the key person is and ensuring that his absence will not sink the ship is the key to running a successful business.

Who is the key person?

This individual has the knowledge, inspiration, creativity, and the skills to personally see the growth and development of the business. His talents and ability are critical to the growth and viability of the company on the whole. The loss of this person, for whatever reason, will have a direct impact on the business.

How to identify the key person?

The key person has the caliber high enough to make the difference. It is vital for the company to either recruit someone who already has the necessary gifts and skills or groom him from a young age to fit the bill. The key person stands out and is fairly easy to be identified by an outsider.

Qualities of a key person

The job description lists the basic requirement. The key person should be able to do more than just fit the job profile. He should be a person that can be go-to for any situation. Any calamity or crisis in the office can be taken care of by him. An effective key man has excellent communication skills, is confident and is quick on his feet.

How to identify him?

Hiring and Identifying top performers are very necessary for the business. This is to be done carefully so that the business does not get saddled with staffs that are incompetent. Once the key person is identified and trained, there is the question of protecting him and keeping him in the company.

The performance standards and the activities of the key person are exemplary to the running of the business.

What is the need to insure the key person?

There also arises the need to protect the company as well. Should the day arrive when the key person is unable to deliver his role, there should be sufficient backup. When the key person is insured, the company need not worry about it because not everything is technically riding on this key person. The insurance takes care of everything until a new person is identified to fill the void.

What happens if he dies?

If and when the business loses this key person, it is more than likely to buckle down under the pressure. There will be a breakdown in the daily activities and a gap in the routine. This will lead to financial losses that the company might never be able to recover from unless there is timely action taken. Being prepared for the loss of the key person should be taken up seriously by the company.

What is key man insurance?

The key man insurance is a policy that caters to the harm done or the price paid by the business in case of the loss of their key person. The person in mind could be the entrepreneur, the CEO or the director. The policy is not paid to the key person who is insured but to the business in which he worked. The financial loss that takes place because of the loss of this key person is taken care of by the insurance. While the entire loss may not be taken care of, a majority of it is covered by the insurance.

How does key man insurance work

Once the key person is identified, the next step is to summarize his contribution to the company and put a financial price on it. That would be the loss that the business is likely to suffer should the key person be rendered incapable.

In order for the company to become the beneficiary for the compensation of this loss, they pay premiums regularly. This works like every other insurance.

Steps involved

  • Figure out the key person.
  • Know the difference between capital protection and revenue protection. The purpose must be documented in writing. This is for tax requirements. Capital purpose involves paying off shareholders while revenue purpose includes recruitment and training of a replacement.

A company buying key man insurance like can claim a deduction for the premium paid on the policy as a business expense. Find out more details on https://www.mykeymaninsurance.com/.

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