How life and critical illness insurance can protect you from business woes

Wednesday, February 24, 2010

It is quite obvious that if the main bread winner in a household is to die or fall critically ill it can be seriously detrimental to the family’s well being. Well this is never more true than when you move this focus outside the household into the workplace. As the owner or even a director of a business you are often a key lifeline to the well being of a company. If you are to fall ill then, just as with a family, the business will struggle. Not everyone is aware of the protection available, but there are ways of insuring your company against this sort of occurrence by adopting certain life insurance policies. One of these policies is known as Key Man Insurance.

Key Man Insurance, or Key Person Insurance to be politically correct, does more or less what it sounds like. It protects your business against losing a key member in the means of production. In the event that one of these key people should find themselves critically ill or should unfortunately pass away, then instead of paying out to their family, it would be invested back into the business in order to try and soften the resulting financial blow. Depending on the nature of the business, this money can then be used to source new staff or outsource the work of this member of staff. These funds can even be used to shore up a major shareholder’s stake in the business or to pay off business loans similar to the way that traditional life insurance policy is used to pay off a mortgage. Basically, this will serve to shield your business from those costs incurred by replacing the knowledge and skills lost by the death of a key member of staff.

Depending on your personal business situation this may very beneficial for you protect against possible mishaps.

Nigel Shaw.