Most businesses rely on several critical employees to keep operations running smoothly. So what happens if one of those employees can’t come into work due to an illness or injury? An absence of a few days could be a major hassle. An absence of a few months or longer could be downright disastrous. Key man disability insurance protects businesses from this underrecognized threat.
Disability Can Lead to Disruption
Disability can strike quickly and unexpectedly, and when it does, it can turn a workplace upside down. Consider the following scenarios:
- Greg is a website developer for an online retail company. He experiences a serious head injury while on vacation and can’t work for nearly a year. In the meantime, no one else at the company knows how to maintain the website. For several weeks, nothing can be updated and no issues can be fixed, resulting in lost income. The company also has to invest substantial resources to recruit, hire and train a substitute.
- Cindy is a senior account manager at a financial firm. She is in charge the company’s highest-value accounts, and many important clients rely on her services. Then she is diagnosed with cancer and needs to take time off so she can undergo surgery and chemotherapy. In the meantime, someone else has to take over the company’s top accounts, but with a heavy workload and a lack of experience, things don’t go well, and a major clients ends up leaving.
- Frank is the head of sales at a small company. He has succeeded in implementing a strong sales strategy that has produced growing revenue. Then he experiences a stroke and cannot work. In his absence, the company struggles to maintain a strong sales strategy, and revenue drops sharply. The decrease in revenue comes at a particularly bad time, as the company was applying for a business loan to fund an expansion. The loan and the expansion fall through.
Key Man Disability Insurance Helps Businesses Recover
Smart workers secure disability insurance to protect their incomes against the financial impact of a disability. Likewise, businesses can secure a key man disability insurance policy to protect the business.
Key man disability insurance is also called key person disability insurance. It’s a type of disability insurance policy that is owned by a company and covers a critical worker. If the insured worker can’t work due to a covered disability, the company receives a payout.
Using Key Man Disability Insurance to Get Back on Track
Key person disability policies typically have benefit periods of 12 to 24 months. This gives the business ample time to deal with the situation, for example, by hiring and training a new worker. The benefits can also be used to make up for lost revenue or to deal with losses stemming from the worker’s unexpected absence.
Leveraging Key Man Disability Insurance for Financial Strength
To stay healthy, businesses need to keep overhead expenses down while continuing to bring in revenue. Because many companies have small reserves, an unexpected setback can threaten the company’s success. Many business owners recognize the threat posed by natural disasters and even cyberattacks, but they may overlook the risk of disability.
Just as businesses secure property insurance and cyber insurance, they can secure key man disability coverage to protect their bottom line. The Social Security Administration says there’s a one in four chance that a 20-year-old worker will experience disability before reaching retirement age. For a company with multiple key workers, the odds of a disability impacting operations goes up.
Even if a business never has to file a claim, having key man coverage in place can be a good way to show stakeholders that a company is financially secure. Whether you’re trying to appeal to investors or lenders, this could help to make a company more attractive.
Protecting Multiple Workers at Once
Many businesses have multiple employees who are vital to maintain smooth operations. It’s possible to secure coverage for all key employees, and with guaranteed standard issue key man disability insurance, it’s also possible to avoid medical underwriting.
When multiple workers at the same company buy disability insurance from the same carrier, it’s often possible to secure guaranteed standard issue coverage that bypasses the normal medical underwriting requirements. This option is also available when a company needs to take out key man disability insurance on multiple employees. In addition to making the application process much easier, this is also a great way to secure coverage for workers with pre-existing health conditions.