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Keyman Insurance Planning (公司首要人保险规划)

Keyman Insurance Planning (公司首要人保险规划) Keyman Insurance Planning (公司首要人保险规划)

Keyman Insurance
Most of us are familiar with how the life insurance policy of a family's breadwinner help-out in case of his/her untimely demise. However, the fact that life insurance can play a similar role, in the form of Keyman insurance, for businesses is not so well known.
What is Keyman insurance used for?
Keyman insurance helps a business recover from the loss of its valuable assets viz the persons who run it and/or own it. Individual talents are becoming critical to the success of many companies and employees are also becoming an important factor in investors' valuation of the entities. Every business has at least a few valuable employees who contribute significantly to the running and growth of the company. It makes sense to insure against the unfortunate event of their untimely demise. This is because the company may face business/financial loss in case of sudden death of such valuable employees. For example, the business was in trouble as following his demise, invoices were not being issued. The lack of cash flow meant that wholesalers and staff could not be paid, and the mortgage on the office went into arrears. Within months, the business was in liquidation. It is here that Keyman insurance comes into play.

Keyman insurance defined

Keyman insurance can be defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the same employer's key employee (Keyman) and the benefit, in case of a claim, goes to the employer. The `Keyman' here can be any employee, having a special skill set or substantial responsibilities, who contributes significantly to the profits of that organization. It is not a special plan of insurance but just application of life insurance to fulfil a special need.

The object of Keyman insurance is to cover the life of a Keyman for a monetary value so that in case of untimely death of such Keyman, the loss to the firm is recouped with monetary assistance (insured amount) received from the insurance company. As the name implies, the 'key person' is the key to the business' success; without him or her, the company would stumble.

Benefits of Keyman insurance to the company
1. It protects against business risk in the event of unfortunate death of the key person.

2. The premium paid will be treated as business expenses.

3. Disruption of lines of business credit due to the death of the Keyman can seriously affect the business. Here, the insurance money can help as a guarantee of loan repayment in case of death of the key person.

4. The morale of the key employee is boosted. He/she feels important. The sense of belonging increases productivity and helps in retention of the key employee.

5. It helps in keeping the market price of the company's shares stable in case of death of the keyman. If the keyman dies the price of the company's shares is likely to fall but if the investors know that any financial loss can be made up through the insurance proceeds, they may not start offloading the shares immediately.

6. It protects the company's valuation. For example, in case of the company being put up for sale, prospective buyers are likely to put a higher value to the company if they know that it has a monetary back-up (insurance) to meet the cost of replacement of its key person.

For more information about Key-man Insurance click here.
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