A loss of talent can be a major operational setback for a business. If an executive or lead sales professional dies unexpectedly, the company may end up scrambling to address the gap in its roster. It can be equally challenging to deal with the emotional fallout among employees as it is to address the practical challenges triggered by the loss of the key worker.
Provided that the organization carries robust insurance, it may be possible to leverage certain types of policies to help defray the costs generated when a key employee dies unexpectedly. What types of coverage might help a company address the challenges of losing an employee?
Key Person Life Insurance
When companies recognize that they rely heavily on one professional, they may carry specialized insurance to address the unexpected loss of that worker. Key person life insurance is a specialized type of coverage carried by businesses to protect against the financial hardship of suddenly losing a crucial staff member.
Key person life insurance may cover executives, engineers, department heads and anyone else who performs a critical role at the company. Instead of a standard life insurance policy where the covered party selects their beneficiary, key person life insurance is a type of policy carried by the business to defray its operational costs when a worker dies.
A company can choose the amount of coverage it carries and can use the policy payout to cover operational expenses related to onboarding a replacement or carrying out a succession plan. In some cases, the policy may even help cover the cost of fulfilling contract obligations to the worker’s surviving family members.
Business Interruption Insurance
The death of a CEO or business owner represents one of several scenarios that could temporarily prevent a company from operating at all. Business interruption insurance can theoretically help cover expenses related to temporary shutdowns after someone in a leadership position dies.
Particularly when successors require court orders to take over certain responsibilities due to a lack of advance planning, business interruption insurance could prove invaluable after the loss of an executive or owner prevents the company from functioning as normal. The policy can cover rent, revolving lines of credit and even employee-related expenses until the company resumes normal operations. Depending on the circumstances, there may be other types of policies that apply as well.
Reviewing the position of the deceased individual and the insurance carried by the business with a skilled legal team can help those in leadership positions optimize their insurance recovery after a tragic setback. The death of one professional can cost a company thousands of dollars, but insurance can potentially help to limit those losses.