Key Person – Invaluable Asset to an Organization

Labor force is one of the most important resources of an organization. Without workforce, no business can survive. And in every organization there are some employees whose services are significant for the growth of an organization. In the absence of any of these employees the business might have to face financial loss. These employees are called key persons.

Who is a Key Person?

A key person or persons are those employees who are an asset to the organization. It can be the owner of the business, sales manager, project manager, technical professional, etc. If a key person dies unexpectedly, an organization can face lot of problems. Looking for a person who can fill in the key person’s shoes is a task in itself. So, in order to protect the business from any such obstacle, key person insurance is purchased.

What is Key Person Insurance?

Key person insurance is also known as key man insurance. The company or the owner of the business buys key person insurance to protect his business from all kinds of adversities. A key person is insured by the employer but he doesn’t have the facility to reap in the benefits of key person insurance policy.

Let’s suppose there is a company dubbed ABC run by Mark. Jay is his manager who takes care of all the things in the office. In short, he is the backbone or the key person of the company. In an unexpected turn of events, Jay dies of a cardiac arrest. Mark is devastated by this incident. He will take lot of time to overcome this loss, but what’s really bothering him now is the future of his company after Jay. Who will take on Jay’s responsibilities? This is the major question that is troubling him and can boggle any entrepreneur’s mind.

How Key Person Insurance helps?

Key person insurance can lessen the stress caused by the key person’s death. It can provide the funds needed to hire a new person who is equally talented and capable like Jay in Mark’s case. Both time and money are required to bring up the new employee to reach Jay’s level. After the death of a key person, the owner of key person insurance receives a death benefit. This is a lump sum amount and can be used for various purposes.

But it is basically used to find a replacement of the deceased (Jay in this case) and then impart him proper training so that he can perform his duties efficiently.

Key person insurance is also used to pay off loans that the company might have taken to invest in the business. The death claim can be utilized for the smooth functioning of the company and also offers financial stability, especially after the death of a key person.

The company gets a severe blow after the sudden demise of a key person. But if you have key person insurance, at least your main concern regarding monetary matters gets sorted out. And you are able to deal with other things in a proper manner.