Why your business may need key person insurance

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Why your business may need key person insurance

Certain individuals are instrumental to a business’s success, so losing them due to death or disability could be the death knell for your business.can settle the key person’s surety obligations with no impact on their deceased estate.

No business can succeed without people; they are the most valuable asset. And within your business, certain key people have a significant impact on your bottom line due to their knowledge, skills, experience or relationships with suppliers or clients. There will also be funds to pay for temporary skills or services, and for finding a replacement for the key person the business lost.Key individuals often sign surety in order to obtain credit for the business. If a key person dies, the debt may need to be settled in order to finalise the deceased’s estate.

The loss of a key person can have a negative impact on employee morale due to anxiety around possible job losses or the closure of the business. This, in turn, has an effect on production. There is less uncertainty, and business can continue as usual if employees know that their jobs are safe.A lender may require key person insurance when approving funding. This ensures the longevity of the business and reduces the risk to the lender that the business may default on the loan.

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