What is Keyman Insurance?
Keyman insurance is a special type of cover where a business protects itself from the sudden loss of a key person either through death or through total incapacitation. Although the cover cannot bring the person back to the business, it compensates the business and the person’s close family. Keyman insurance brokers usually draft a policy to last the person’s life. Otherwise, the policy becomes invalid after the person’s usefulness to the company.
When a key person, say a manager dies, the company he works for can suffer considerable losses especially if he had exceptional skills, knowledge, and experience. For this reason, the insurance company or agency chips in to compensate the company until the business or company recruits a new person to take up the job or assume the responsibilities of the deceased. As such, the policy usually pays a fixed monetary sum that the policyholder and the insurance company agree on. It however, does not indemnify any actual losses resulting in the person’s death.
If you have a key person in your company or business, talk to leading keyman insurance brokers Sydney as early as possible and have your company covered. For example, if there is one person who the business can credit with most of the profits, your company needs this kind of cover. In addition, if the person’s skills are hard to find elsewhere, such as a unique Intellectual Property, the company needs to obtain cover.
Otherwise, employers have the freedom to decide which persons are phenomenal in their businesses. Look around your organizations to find individuals whose skill is unmatched or whose contribution to the company is unprecedented. Obtaining cover will see you compensated for losses and expenditures occasioned by the loss of important men and women. For example, if your organization finds it increasingly difficult or impossible to transact business, you can apply for compensation. However, you should have proof that this difficulty is expressly due to the person’s incapacitation or death.
Keyman insurance brokers should cover the cost of hiring temporary staffs to fill the void left behind by the key person. At the same time, your company should be compensated for costs incurred in training new managers to assume the office of the deceased manager. Examples of key people in a typical company that need this cover include Chief Executive Officers, Chief Financial Officers, company directors, important salespeople, and leading project managers among others.
Keyman insurance brokers usually do not compensate the company if the key person under discussion leaves the company voluntarily or when the company sacks him. It only applies after unpremeditated situations such as accidents or natural death.
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