Key Man Disability Insurance

Applying for Key Person Insurance for Disability

A business owner may choose to take out a key man insurance policy on the life of a partner or a valuable employee; however a key man disability insurance is just as important. This coverage ensures the continuity of your business and protects your profits should a key player in your organization fall ill or become permanently disabled. Not all insurance providers offer this type of business life insurance however, so finding a reliable company should be high on your priority list. Here are some important tips in applying for key person insurance for disability.

Check for the most competitive rates available

Many key man insurance policies that provide disability benefits are offered at different rates, depending on a number of criteria. Most of these policies are of a short-term nature, so you might want to verify first whether you’d prefer shorter-term or a longer-term coverage when it comes to insuring your business. Finding a suitable replacement can take some time depending on the skill set possessed by the key employee or the scope of his responsibilities within the business. Some key man disability insurance policies work under the assumption that finding a good replacement can be done within 12 to 24 months. If you think your business can find a good replacement within that period, getting these types of disability coverages can work well for your business.

Preparing for the key man disability insurance interview and exam

Most insurance providers will require an interview and an exam prior to the approval of the policy. Normally the interview will be short and may be done in person, online, or over the phone. The purpose of the interview is for the company to complete the personal profile of the insured to make sure that no important detail is left out. Moreover, a physical examination is needed before the approval of a key man disability insurance. Routine physical examination may involve blood pressure checks, blood and urine tests, or even an EKG.

Choosing the payout option

During a claim, a key person insurance policy for disability is normally paid out in two ways – monthly and lump sum. The monthly benefit payout has a shorter elimination period, usually between 30 to 90 days depending on the insurance provider. A shorter elimination period means that only a short period is needed before your business can make a claim on the policy. In the case of lump sum payouts however, a longer elimination period of 365 days or one year is common, although this period may vary depending on the provider.

A good key person disability insurance policy can save your business from potential losses in the event that a key worker or partner becomes temporarily incapacitated or permanently disabled. The proceeds of the policy may also be used in hiring a new replacement. By keeping in mind these helpful tips you can find a disability insurance policy that will provide your business with the protection it needs, so that productivity and profitability are not compromised in the absence of one or a few valuable employees.

Key Person Life Insurance and Business Insurance

While there are several insurance policies you can take out for your business, a key person life insurance policy is a more specific type of business life insurance that you obtain on the life of a key employee, a partner, or an important executive within your organization. This type of business insurance is also known as key man life insurance. There is a world of difference between a key man life insurance and simple business insurance, although both are essentially used to protect your business from losses arising from unforeseen circumstances.

What is business insurance?

Business insurance is normally taken out by a business owner as a form of business protection against losses. A business insurance coverage will ensure business continuity, especially when normal business operations are hampered by unexpected turn of events. This insurance is normally available through a wide range of coverages and policies, including property insurance, casualty insurance, liability insurance, commercial auto insurance, business interruption insurance, and health insurance, among others. If you want to protect your business against fire or flood, you can obtain a fire insurance policy or a general property insurance coverage.

What is key person life insurance?

Key man life insurance is one form of business insurance normally taken out on the life of any employee whose skills, or contributions to the company are considered vital to the continuation or progress of the business. If these employees or partners fall ill or become disabled, the profitability and growth of the business could be placed at risk. The proceeds from a key person life insurance claim may be used for business-related activities, such as the recruiting and training of replacements, financing for the continuity of the business, or in buying out the shares of the partner or investor who is no longer able to participate in the business.

Key person insurance may be in the form of life insurance and/or disability insurance. In both cases, the beneficiary of the coverage is the business, and not the person insured. A key man life insurance benefit can be claimed only if the insured key personnel has died, while a key man disability insurance becomes payable only when the insured worker or partner has become disabled or incapacitated.

The clear difference

Simply put, key person life insurance is just one form of business life insurance.  A business insurance policy is obtained by a business owner in order to provide ample protection of his business against losses brought about by unforeseen eventualities, whether from fire or flood, accidents, or legal liabilities. Key person inurance protects the business against losses resulting from the death or disability of a valuable employee or employees. The type of business insurance policies you will obtain for your company will ultimately depend on its specific needs, the value of your employees in the continuation and profitability of your business, and the potential risk faced by your enterprise.

A key person life insurance coverage is definitely one of the most valuable forms of business insurance you can obtain for your company, especially if you have a small service business that is entirely dependent on the skills and contributions of your top employees.