Key man dies, business gets $12 million! What do key people mean for the business?
19 Jul 2021
Recently, HCC, an internationally renowned insurance company, paid up to $12 million in insurance claims to Roc Nation, a US entertainment company, after the unexpected death of a key figure in the company.
In 2016, Roc Nation purchased Enterprise Key People Insurance from HCC and renewed it on December 21, 2017. The next day, 22 December 2017, a key figure in the company, Jordan Feldstein (see figure below), died unexpectedly of an acute pulmonary embolism. Roc Nation filed a claim with HCC for $12,529,222.
When it comes to Key person/man insurance,our Chinese friends may find it strange, but in Western society it is one of the common corporate insurances.
Today YG Insurance comes to talk to you about what is a key person in the enterprise and how the business key person insurance protects the operation of the enterprise.
What are the key people in the business?
Usually the enterprise will be their own buildings, inventory, production equipment or vehicles and other assets insured, in fact, the most important assets of the enterprise is talent.
In every enterprise, there is one or more “key people” for the day-to-day operations and future development of the enterprise plays an important role. If these people suddenly become ill, disabled, or suffer from misfortune, it will lead to a sharp decline in business turnover and profits, and may even endanger the survival of the enterprise.
A design company of about 10 people with two senior designers. A senior designer has been unable to go to work for three months after breaking his ribs in a mountain bike accident. Three months is not short, the company’s boss can not find the same qualifications for a while, the designer’s projects can not be handed over, resulting in the company’s annual turnover fell by 20%.
How do you identify key people in your business?
The number of key players in a business varies from business to business, but at least one. Key people may be:
- Business owner/manager
This person defines the direction of the business and the vision for the future. Without this person, the development of the enterprise will face serious problems.
- Sales people
Without this person, existing customers may leave, new customers will be harder to attract, and the profitability of the business will be affected.
- Technicians/developers/finance staff
Without this person, existing projects cannot be developed and the development of new projects can be delayed or stopped. （
If you don’t know how to identify key people in your business, you can consult YG Insurance, which will give you professional advice from the perspective of protecting the company’s operations and development.
How does corporate key people’s insurance work?
In the event of disability, illness or accident of a key person in an enterprise, the enterprise can obtain liquidity compensation, support the operation of the business, and help the enterprise tide over the difficulties.
The actual case
An eight-person wholesale food company bought Corporate Key People insurance at YG Insurance. The business owner is a key figure in the company, where he is responsible for connecting with customers and food distribution. He broke his Achilles tendon playing football and was unable to go to work for three months. In those three months, insurers have offered the company $6$000 a month in insurance claims, allowing it to hire part-time workers to drive and deliver goods, while owners can simply call customers at home and do some paperwork. In this way, the company ensured normal operation, smooth through the difficulties.
In addition, the owner himself received a certain amount of compensation from the ACC. However, ACC insurance is to protect individuals, and enterprise key people insurance is to protect enterprises.
In addition, it is worth mentioning that the insurance of key corporate figures can be tax deductible, but the details of the tax credit should be consulted with professional financial personnel.
How is the amount of insurance for key people in the business determined?
How much protection each business needs depends on the number of people they want to protect, the financial value of key people, and the affordability of the business.
YG insurance recommends that the amount of protection should be the annual income of key people 1-2 years, depending on the type of insurance and specific circumstances can obtain a one-time payment or monthly compensation.
The amount of insurance should cover:
- loss of business turnover due to the absence of key players
- additional costs to cover the loss of key people, such as employee costs (including advertising, training, and even placement costs).
YG insurance can help you plan and calculate.
Need some advice but not sure where to start?
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