Who are your “Essential Employees”?

"essential employees"

If you are operating a small business, you are likely relying on a small crew of “essential employees” to get the job done.

Many “essential employees” in small firms have to wear several hats and, if one of them or an owner should die, the business could suffer greatly from that sudden loss of talent or one of the owners who is integral to the operations.

If you don’t have “key man” insurance, that setback could be devastating to the viability of your operations, whereas coverage would provide you with extra funding that you would need while recovering from the loss.

Key man insurance is simply life insurance on the key person or “essential employees” in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business, the ones whose absence would sink the company. You need key man insurance on those people.

Key man insurance basics

Before purchasing coverage, give some thought to the effects on your company of possibly losing certain partners or employees.

In opting for this type of coverage, your company would take out life insurance on the key individuals, pay the premiums and designate itself as the beneficiary of the policy. If that person unexpectedly dies, the company receives the claim payout.

This payout would essentially allow your business to stay afloat as you recover from the sudden loss of that employee or partner, without whom it would be difficult to keep the business operating in the short term.

Your company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner.

In other words, in the aftermath of this tragedy, the insurance would give you more options than immediate bankruptcy.

Determining whom to cover

Ask yourself: Who is irreplaceable in the short term?

In many small businesses, it is the founder who holds the company together, he or she may keep the books, manage the employees, handle the key customers, and so on. If that person is gone, the business pretty much stops.

Determining the amount of coverage

  • The amount of coverage depends on your business and revenue.
  • Think of how much money your business would need to survive until it could replace the key person, come up to speed and get the business back on its feet.
  • Buy a policy that fits into your budget and will address your short-term cash needs in case of tragedy.
  • Ask us to get some quotes from different insurers.
  • Check rates for different levels of coverage ($100,000, $500,000, etc.)

We are in the business of helping people. We help consumers save money, we help businesses reduce risk, and we help families protect their financial future. How can we help you today?
Charlie Fellous Broker/Principal at HALO Insurance & Benefits Group Contact us at 314-351-HALO (4256) email: cfellous@haloibg.com

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