Keyman insurance can be an effective way of protecting your business in the event an important person in the company dies, or is no longer able to continue in the business due to critical illness.
It can help provide financial compensation to the business for the loss of a key employee, both to cover the potential short-term loss in revenue, but also to cover any additional costs for recruitment or training.
Typically speaking, many businesses make much of their profits from a few high performing members of staff, or have a few key employees with specialist skills that they rely on within certain departments.
Technically there is no real, or legal, definition of a ‘key person’ when it comes to insuring members of your staff.
The decision who to cover is down to the individual business.
However, it’s important to research who in the company should be classed as a ‘key employee’ before making a decision, as it’s one you’ll need to get right.
When it comes to identifying your key people, there’s a few areas of the business to look at:
Company Directors & key decision makers
The people at the top of the company can often be the hardest to replace, and losing them would be a huge blow to the business.
These are the people making the big strategic decisions about the company.
Their skills, experience and knowledge about the company and the industry it operates in will not be easy to replace.
It’s also likely that company directors will hold key relationships with major customers, and losing them from the business due to death or illness could cause concern among these customers - particularly if they bought into your company based on that individual relationship.
So company directors should definitely be on the list of key people.
Top performing sales people
While you may have a full sales force in your company, it’s just a fact that the majority of your sales - and revenue - will likely come from a minority of high performing sales reps.
Losing a top performer can have an immediate, devastating impact on your revenue and could even damage your relationship with prospects and new customers.
It’s not just the immediate revenue that’s at risk though.
Good salespeople aren’t easy to find, and they’re expensive.
According to some research it can cost up to 200% of a sales rep’s annual salary to replace them.
So you need to protect your business from this potential loss.
Key project managers
Every business needs people who just get things done.
These are problem solvers, relationship managers, and they make sure projects and your wider business operations run smoothly.
Without these project managers your systems could stall, your supply chain gets bottlenecked, and client projects start to fail.
And key project managers aren’t easy to replace.
They not only need to know about project management, but they need to understand the nuances of your business’ projects, how you work and how your wider systems and operations work together.
Losing them could lead to immediate inefficiencies that lead to drops in productivity or cause delays.
Using keyman insurance to cover your best project managers can pay off in the long run should the worst happen.
Employees with niche or high value skills
Depending on the nature of your business you could be reliant on a skilled workforce, and a few key skilled workers in particular who make sure standards are met and work is getting done.
They could be your engineers for example who know your products inside and out and who are the ones driving innovations and improvements to increase your profitability.
Losing these skills and valuable insights can have a hugely negative impact on the profitability of your company - so you need to protect yourself against losing them.
Plus you’d have to think about the lack of training they’d be able to offer and how that would affect the rest of the team, and the time it would take to find or train someone up to the same level.
Protecting your business by covering your key employees
As we’ve said, there’s no set definition of a key person in business and it’ll be up to you and your individual company to identify who these people are.
Typically speaking though, the areas we’ve covered in this guide are the ones most commonly looked at for keyman insurance policies.
If you want to find out more information about keyman insurance policies, or need more help understanding who you should look to cover with a keyman policy, get in touch.