Partners would like to believe they’re irreplaceable, and for a few of them, that may be true. For others, a keyman business insurance policy will pay out on the death of a key business partner to protect the company in the event of their deaths.
The loss of a key business member, whether by death, disability or dreaded disease, could result in a loss of income, or even the foreclosure of the business. If a key man is disabled, dies or is diagnosed with a dreaded disease and unable to perform, then the policy pays out. This money goes to business and can be used to do the following.
The partner or employer can be replaced by a subordinate if he or she is trained. The money paid out by a keyman business insurance policy may be used to train such an individual. This can mean paying for tertiary education or taking an RPL exam (Recognition of Prior Learning).
Headhunt qualified alternatives
Instead of training someone already in-house, the money can be used to head hunt a suitable replacement. Given that the business suffered the loss of the keyman to warrant the search, they will need to find someone as qualified to replace him or her, which is costly.
Substitute lost turnover
The business may be able to continue running without the keyman, though may need to find its feet. That is, it may need to reorganize itself and change processes to function without him or her. The keyman business insurance policy payout may be used to substitute the loss in turnover the business will experience as a result of not running optimally.
Change the business
Often the keyman performed the core function of the business and without him or her the business may not be able to offer its intended service or product. The keyman business insurance policy money may be used to change the business into something that the current key members can perform.
The money may also be used to pay of loans that the business has incurred with the keyman business insurance policy. It may also be used to buy back shares of the departed from his or her family (as they may have been bequeathed). Most keyman business insurance policies are used for this purpose.
Alternatively, the money from the cover may be used to close the business. This will mean legal fees, paying dividends and debt. If your business does not have life cover for its key members, fill in our online quote form and an insurance representative will contact you to discuss your options.