Keyman Insurance is a form of business life insurance and disability insurance that provides money for the business when a key person is suddenly out of the picture due to death or disability insurance.
Key man Insurance (or as more are calling it now, keyperson insurance), is designed to provide an injection cash into a company upon the death or disability of a key person in the business.
Many businesses have a small handful of key people who have special knowledge, skills, experience or connections that make them a key asset to the organization and its ongoing financial success. If one of these key people were suddenly not in the picture any longer due to death or disability it can create a large amount of uncertainty. For this reason Key-person insurance is strongly recommended on any key person in the organization.
Not sure that Keyman insurance makes sense?
Imagine the uncertainty from the following stakeholders in your business when a key person dies or becomes disabled:
Your staff will worry about job security if the company is unable to operate at the same level.
If the staff is made aware of the key person insurance and contingency plan they will be reassured and feel secure – knowing that the situation is being addressed in a stable fashion
Your lenders (ie banks & creditors) may ask for earlier payment of debts as your business is a higher risk due to the loss of the key person. Or they might withhold additional loans
Lenders can be shown the cash injection and be reassured that the business is still financially stable as it works to replace the key person.
Your accounts receivable might slow pay worse than they did before -or not pay at all. Especially if their relationship was with the key person.
Even if they do slow pay the funds from keyman insurance will provide relief until the situation is addressed
Your clients might worry about projects underway or feel that they are doing your business a favour by going elsewhere.
Client service can be addressed more quickly when cash is infused in the business
Your competition might approach your clients and staff to see if they are worried and want to go with a more “stable” company
The business will be able to resist the “poaching” of clients and staff by spending appropriately to address service and staffing issues
Your suppliers might change credit terms due to concern about your business’ financial viability.
Money from the key person insurance will help to ease these problems.
Key Person Insurance can be keyman life insurance, keyman disability insurance, or Keyman Critical Illness Insurance and is an important Business Life Insurance
Return to Business Insurance Canada for more business insurance information.
Note: Always speak with a licensed insurance professional about your specific situation. This insurance information is general in nature and the policy wordings always take precedence. It is possible that there are errors and omissions in this website and www.canada-insurance-source.com, or its authors, take no responsibility.
Keep in mind that insurance licensing, legislation, and policies often vary by province and most certainly by country. Canada Insurance Source is a free information source. So use this site to gain a general understanding of insurance with your own area and situation in mind. Make sure you review the "please read" page. Always speak with a licensed insurance professional about your specific situation.
Always speak with a licensed insurance representative about your specific situation.
This site is general in nature and there may be errors or ommissions