Some people are central to it all. What if they’re away?
Think of the person your business would struggle to operate without. If they died or could not work, what would happen to revenue, customers and the bills?
Look at the business impact. Identify the questions. Start a clearer conversation.
No details needed. Start with the question on your mind.
THE BUSINESS OWNER’S NOTEBOOK02
Look beyond the job title.
01
An essential person
Knowledge. Relationships. Leadership.
+
02
The business impact
Revenue. Replacement. Cash flow.
What would it take to keep moving?
THE STARTING POINT
Key person insurance can help a business manage the financial impact of the death or covered disability of an essential owner or employee. Different risks require different coverage. [1]
01
The dependency
Whose absence would affect customers, decisions, delivery or revenue?
02
The disruption
What would the business need to pay for while it finds a way forward?
03
The response
How would cash reserves, backup people and insurance work together?
A FEW MINUTES. BETTER QUESTIONS.
Whose absence would change things?
Choose a situation to explore. These prompts help you prepare questions. They do not calculate a loss, assess eligibility or recommend coverage.
LEADERSHIP & CONTINUITY
The business needs time to find its footing.
Imagine an owner who leads the business dies. Decisions still need to be made, customers need reassurance and the team needs direction. Think about the costs the business might face during that transition.
THE QUESTION TO PAUSE ON
What would the business need to keep operating while leadership and responsibilities are rebuilt?
Key person life insurance may provide money after an insured death. A buyout of the owner’s shares is a separate funding need that should also be considered. [1]
Bring these questions to the conversation
Choose any that matter to you.
SKILLS & DELIVERY
One person holds knowledge the team relies on.
Imagine your technical lead, senior professional or operations specialist cannot work because of illness or injury. Projects may slow while someone else learns the role or a replacement is found.
THE QUESTION TO PAUSE ON
How long could the business manage, and what would it cost to cover that person’s work?
Disability coverage has specific eligibility rules, definitions, waiting periods and limits. A person’s inability to do some work does not automatically mean a claim qualifies. [1]
Bring these questions to the conversation
Choose any that matter to you.
CUSTOMERS & CASH FLOW
Relationships can be as important as equipment.
Imagine the person who brings in much of the new business dies or cannot work. Consider how customer contact, renewals and the sales pipeline would be handled while the team adjusts.
THE QUESTION TO PAUSE ON
How much of the business depends on relationships that only one person manages?
Insurance may help with an insured loss. Shared customer records, cross-training and a succession plan also deserve attention. Ordinary resignation is not a life or disability insurance claim. [1]
Bring these questions to the conversation
Choose any that matter to you.
A FRESH LOOK
The business has changed. Has the protection?
Imagine the company has added a location, a larger loan or a new specialist. The people it relies on, and the costs of losing them, may have changed too.
THE QUESTION TO PAUSE ON
Does existing coverage still reflect the people and obligations the business now depends on?
Review who is insured, who owns the policy, who receives benefits and whether a lender has a claim on the proceeds. Coverage changes are subject to insurer approval. [1]
Bring these questions to the conversation
Choose any that matter to you.
Give each part of the plan a job.
Money, people and preparation all have a role. Start with the business need each is meant to address.
01Cash & credit+
Reserves or available credit may help bridge a disruption.
How much is available, and what other needs rely on the same money?
02Backup people+
Documented processes and cross-training can reduce reliance on one person.
Who could step in, and what would they still need to learn?
03Life insurance+
A key person life policy may provide funds following an insured death.
Who receives the benefit, and what business need should it support?
04Disability coverage+
Eligible benefits may help the business during a covered disability.
What are the waiting period, benefit period, definitions and exclusions?
A little more clarity.
Is this the same as personal disability insurance?+
No. Personal disability insurance generally addresses an individual’s income. Key person coverage addresses a business need. Business overhead expense coverage has another purpose: eligible operating expenses. Review the contracts and intended use of each.
Does coverage pay if a key employee resigns?+
Ordinary resignation, dismissal or retirement does not trigger a life or disability insurance benefit. Those situations call for staffing, retention and succession arrangements.
How much key person coverage is enough?+
There is no universal salary multiple that answers this. Examine the business impact, replacement time, existing resources and insurer requirements with your advisors. This page does not calculate a coverage amount.
A RELATED QUESTION
Would an ownership interest also need to be bought if that person died or became disabled?
I help people make clearer decisions today, before life forces harder ones later.