Deciding on the Key Person for Life Insurance
No one likes to think about the possibility of death, but loan life insurance is one way to ease the financial burden that can come with losing a business partner. When you choose a life insurance policy, you are essentially choosing who will take care of your loved ones financially if something happens to you, but you also need to think about others investing and running your business with you too. It is not a decision to take lightly, so we have therefore provided some help below.
The Important Decision
One important decision you must make when choosing life insurance is who will be the key person. It is good to discuss this with your family and business to decide where the most financial impact would be created should there be a sudden death of one of the business partners.
Think about the other partners and their families. Who has the biggest financial share in the business? Who brings the most expertise and skills to the business? Also, think about whether various family members would have the necessary skills necessary to step into the business and help. Which partner’s spouse could that apply to?
When it comes to life insurance, and indeed key person insurance when it comes to businesses, affordability is another decision, so we must nominate the person or persons who we most need because of their financial and/or skills contribution. The business expenses continue to increase as fuel costs do, whether related to electricity or gas. Also, we have to think about other utility bills such as water. As well as the cost of running machinery and computers. All this will still need to be paid for in the event of the death of a business owner or an employee the business relied heavily upon to function and bring in sales and income.
Anyone with children will be keen to purchase basic life insurance because there will still be the children’s education to fund. That is the case for all when they reach a certain stage in their education. You will want this covered by an effective life insurance policy that would provide a sufficient amount to cover these costs as well as the above-mentioned ones.
Who Should Be the Key Person to Insure the Life Of?
So, the key person ideally is the person most relied on in a business. Perhaps not just for their investment and skills but also because of the reputation and rapport that they have built up with customers. Their death could mean a lot of negotiating to be done to convince those you deal with that the quality of service from a business will still be maintained. This may cost money in extra promotions to put you back on the same footing as before. Key person insurance can provide much-needed financial stability for a business.
Think mainly, though, about the immediate financial impact should an investment need to be pulled out of the business because a loved one needed it to pay funeral costs or household bills. We have to think about practicalities, however morbid it seems right now. We have other types of insurance to protect us from financial uncertainties that could result from unexpected events, so we should think of key protection insurance in the same way. Particularly when the financial impact could be even greater than with other types of insurance.
Thinking About Who Would Benefit Most
It may be helpful to think about key protection insurance in terms of who will benefit most from the policy. The key person must have a dependable income as well as dependents who would be financially affected by their death. For example, those involved in a business and at home.
The person benefiting will, of course, be a person other than the key person nominated. That is the point of any kind of life insurance. It will financially assist those left behind. Except that those living now will have peace of mind that if anything happens to them, the uncertainty has been covered.
There is no doubt that all types of insurance are an important part of financial planning. Deciding who will be the key person in a key person’s insurance, can be a difficult decision, but it can provide much comfort and financial security knowing you have nominated someone everyone agrees on. Taking into consideration factors such as income, the skills you would need to replace, and dependents, can help you make the best decision.