In the event a vital employee becomes disabled, this type of insurance provides the company with disability income checks to make up for financial loss or use for temporary replacement costs. It is designed to provide financial stability in a time of stress and anxiety due to the sudden loss of an important employee.

Who Needs Key Person Disability Coverage?

• Employees who would be extremely difficult, time-consuming or expensive to replace
• Highly skilled employees with unique training
• Employees with exclusive ties to key clients, like sports stars
• Narrow profit margins where a staff loss would mean financial trouble

• Need to protect their revenue stream from loss (ex: hospitals protecting against the loss of a high-earning, respected surgeon)

• Would be devastated if a high revenue-producing client became disabled and unable to perform

Key Person Disability vs. Key Person Life

When most business leaders think of purchasing key person coverage, they turn to life insurance. However, industry leaders point out that the chance of losing a key person to disability is 17 times greater than losing a key person to death, and the costs of hiring a recruiter to replace the key person and training him or her for a short period of time could be much more exorbitant than finding a permanent replacement.

Requirements and Coverage Options

To obtain key person disability coverage, the individual must be a consenting employee and you must illustrate that your business would incur substantial financial loss without him or her. To qualify as a key person, most insurers require that the employee’s salary be in the top 20 percent of the company and that he or she makes at least $110,000 in 2010. All key person policies are written specifically for the employee in question.

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