key-person-disability-insuranceMost businesses run like a well-oiled machine. To operate smoothly, every piece of the machine has to work at maximum efficiency. So, what happens if an essential person in the business is suddenly unable to contribute? What if a top leader or sales professional becomes disabled and unable to work?

In cases like this, key person disability insurance can help.

How does key person disability insurance work?

Key person disability insurance covers one or more employees whose work is vital to the continued success of the company. When a covered worker experiences a qualifying illness or injury that prevents that individual from working, the policy pays the company a disability check.

Any business disruption can cost a company money, and this includes disruptions caused by a critical employee missing work. At the same time, recruiting, hiring, and training new workers is a costly enterprise, whether those workers are hired on as temporary replacements or permanent staff. A key person disability insurance check can help the company cover the financial loss associated with the lost work. It can also be used to pay the salary for a replacement worker.

Key person disability insurance is a type of short-term disability coverage. Most policies provide benefit periods that last between 12 and 24 months.

How is key person disability insurance different from regular disability insurance?

Most disability insurance policies provide payouts to the employee experiencing an illness or injury. Key person disability insurance, on the other hand, provides a payout to the employer. Both types of coverage are important and having one does not replace the need to have the other.

If an essential worker has to stop working, both the worker and the company will suffer financially. A regular disability insurance policy will ensure that the worker’s personal finances remain intact during the disability, while key person disability insurance will ensure that the company’s finances remain strong.

Does your client’s business need key person disability insurance?

To determine whether a business needs key person disability insurance, ask the following four questions:

  • Do you have employees with special training, skills or knowledge?
  • Would these employees be difficult to replace if a sudden illness or injury prevented them from working?
  • Would the business suffer financially without these workers?
  • Would recruiting and onboarding replacement workers cost the company money?

If your client answers yes to these questions, then you have uncovered the need for key person disability insurance. If key person is a new product for you, contact the DIS sales team for assistance. We’ll walk you through every step of the process.

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