Key Man Insurance in Vermont
What is Key Man Insurance?
Many businesses large and small rely heavily on key people to run their operations. The loss of such a person to death or disability is often devastating for a business, potentially resulting in lost profits, increased debts and even financial insolvency. Key man insurance can help businesses in Vermont financially survive the covered temporary or permanent loss of a key person.
Key man insurance is a widely used but highly specialized form of commercial insurance. There are multiple coverages to consider when selecting a policy, and the financial value of a key person should be accurately calculated when purchasing a policy.
What Coverages Does Key Person Insurance Provide?
Key person insurance typically provides coverage for the individual or individuals who are specifically named in a policy’s paperwork. Rather than determining whether a person was “key” or essential after losing them, a business normally determines who is essential beforehand and purchases coverage for those people.
For covered people, key person insurance normally extends three protections:
- Standard Life Insurance, which may cover death
- Total and Permanent Disability Insurance, which may cover some injuries or disabilities
- Trauma Insurance, which may cover other injuries or disabilities
All the protections are usually limited to incidents that occur while a policy is in effect, and the life insurance offered tends to be more akin to term life insurance than whole life insurance. As is true with most insurance policies, the exact protections that a specific policy offers are determined by that policy’s terms and conditions.
How Much Coverage Does Key Person insurance Provide?
Determining the true value of a person is extremely difficult and sometimes, their full value isn’t realized until they’re gone. Because these calculations are so challenging and can be subjective, most key person insurance policies offer a predetermined amount of coverage. Businesses can calculate an essential person’s financial value to the company and then purchase coverage for that amount.
What Businesses in Vermont Need Key Person Coverage?
Many businesses in Vermont can benefit from having key person coverage. There are businesses of all sizes and in many different industries that rely heavily on one or a few people.
Just a few examples of businesses that might want this coverage are:
- Large corporations that have C-level executives who make major decisions
- Small businesses that are mostly run by the owner
- Businesses that have a skilled worker who knows how the business runs
- Businesses that have knowledgeable employees who perform work that a temp can’t easily replicate
In short, any business that would be unable to operate without a specific person might want coverage for that person.
Sometimes, a business may be required to purchase coverage before the business will be approved for a loan.
What Can Payments Made by Key Person Policies Be Used For?
Payments made by key person policies for covered claims are usually sent directly to the business that purchased the policy. Payments may be used for many purposes, often covering costs related to:
- Searching for a new person to replace the absent individual
- Paying bills and salaries while revenue drops during a temporary absence
- Minimizing debt that’s taken on during an absence
- Closing costs that stem from shutting the business down
- Investor payoffs for those who are financially involved in the business
- Severance packages for employees
- Paying off outstanding debts
How Can Vermont Businesses Get Key Man Insurance?
Because this is such a unique form of insurance, it’s especially important to work with an experienced agent who’s familiar with the protections that are available when selecting a policy. A knowledgeable and independent agent will be able to provide wise guidance and recommend the best policy no matter what insurance company offers the policy.
To speak with a knowledgeable and independent agent who’s in Vermont, contact the team at T.S. Peck Insurance. Our dedicated team has helped many businesses find the key man insurance they need, and we’re ready to assist you.