Your directors, shareholders, CEOs and CFOs, department managers and even some employees all serve an integral role in your organization, and without some of them, your company may not be where it is at today. Though death is inevitable, it does not hurt any less to lose a key member unexpectedly. From finding a suitable replacement to compensating for their role in the interim, and from reassuring long-term customers to reestablishing vendor relations, there is a lot that you must do in the event of a key person’s death. Each of these items requires valuable resources such as time and money, which is why key employee life is so essential.
Key person life insurance is designed to compensate businesses for the loss of key employees. The maximum term of most policies is the length of time that the employee served the organization. Not only does this type of coverage cover the cost of hiring and training a replacement, and of outsourcing the integral member’s roles in the meantime, but it also covers the cost of salary continuation and deferred compensation benefits paid to the deceased employee’s surviving spouse and family members.
Key employee life is not something that most business owners think about investing in. However, if there are key members of your organization with whom you cannot imagine operating without, it may be worth your while to give it some serious thought.