subject: Business Protection: Insuring Your Top Producers [print this page] Business Protection: Insuring Your Top Producers
Business Protection: Insuring Your Top Producers
Key person insurance helps a company protect its revenue. This is done by placing insurance on top producer(s). The insurance would be a binding contract between the insurance company and the policy holder, where the policy holder is listed as a beneficiary. Meaning that if the events stated in the contract occurred, the suffering company would receive compensation for the loss in revenue. Whole life insurance that is placed on the producer would protect the company from the loss in revenue, if the insured were to die. This contract is usually in effect for a term (5, 10 years, etc). Key insurance is useful when the loss in incoming revenue from the key person would be detrimental to the company's profits. Thus insurance on the producer will protect the company from this loss. Riders or additional insurance could be added to the policy, where the policy holding company is also protected from the key producer becoming disabled. This could be short term or long term.
It is clear that if detrimental events were to occur, and insurance is in place, the company would have protected itself from financial loss. The immense impact from one employee always suggests the need for key life insurance. Especially during times when the company is unable to afford such circumstances, when the company may be unstable or is undergoing heavy changes. Key person insurance will help. For example, If Bob were Verrntech's best salesperson, and brought in 70% of the revenue for the company. There is an insurable interest for the company to have key life insurance on bob. Simply because losing Bobs' productivity would have a high impact on the company's success. The company could place term whole-life insurance on Bob and/or disability insurance. If such circumstances were to occur, the company is protected. If Bob died or became disabled, the company would receive monthly income to compensate for Bobs' absence.
