What Insurance Does When a Key-man Dies

Success in business never just happens. It is achieved through purposive action by men who have the drive to develop a high-quality product, and aggressively seek out customers. In short a key man is one who gets things done and meets the challenge of expanding markets.

Key-men make profits. When a business loses them, it can lose money. When a business insures its key-men, it protects the company and can make money on the deal.

In my experience in working with accountants in providing key-men insurance to their clients, below are my notes on the actual used of the cash proceeds of an key-man policy:

1. Compensate for any reduction in the ability to get credit.

2. Discharged guarantor liabilities from estate of deceased key-man.

3. Help carry on the business.

4. Assured employees' salaries and CPF are paid during re-adjustment period of the company.

5. Discharge outstanding mortgages.

6. Protect the surviving owners of a closely held business from losing control to outside interests.

7. Continue compensation to the family of the key-man for some period of time.

8. Cover the loss of the re-adjustment period.

9. Pay the price for competent and experienced replacements.