Keyman Insurance
Keyman insurance is a specific type of insurance policy primarily for small businesses. These policies are designed to compensate the business when a key person dies or becomes disabled and can no longer fulfill their role.
A key person is generally anyone whose skills and/or knowledge contribute significantly to the business's revenues and profitability. That may include:
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Business owners or partners
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Members of the executive leadership team
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Top salespeople
How Much Keyman Insurance is Necessary?
There's no precise formula for determining how much keyman insurance is necessary to have. The final figure can depend on a number of factors, including:
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The size of the business and number of employees
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How much revenue or income the person being insured generates for the business
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How much outstanding debt the business has
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How much it could cost to hire and train a replacement for a key person
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Whether the business will continue operations should a key person pass away
If you own a family business founded by your parents, for example, then you may want to purchase a larger policy to ensure that the business can continue should one or both of them pass away. On the other hand, if you run a sole proprietorship and have no employees, then you might only need enough coverage on yourself to pay off any remaining debts owed by the business.
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