The Primary Difference Between Life Insurance and Key Person Assurance
It's a common mistake that people think life assurance and key man insurance are identical. In reality, they're markedly different and should not be confused. Read this article to discover the difference between these life assurance policies.
Personal life assurance cover
A personal life assurance policy is a formal agreement that is arranged between an insurance corporation and an individual. This company agrees to pay the individual (or their estate) an agreed figure of money upon demise. The insured usually pays premiums, either a single lump sum or regularly. The main purpose of life insurance is to provide financial security for your loved ones, particularly your family after your demise. As a result, ahead of signing for a life assurance policy, first consider your financial status and the type of life you would wish for your dependants whenever you die. As an example, would your family members have to relocate? Who will pay your final medical bill and cater for your funeral cost? Will there be adequate money for ongoing or future fees like college, mortgage repayments and daycare? It's important that you annually re-evaluate your life insurance policy especially when you change your life status and get married or get divorced. Also when you have a child or adopt a child, or purchase a major item like a small business or a house.
Key Man Assurance Cover
Key man assurance in contrast, is a type of life insurance cover that protects a business just in case of premature demise or disability of an executive, business owner, or even a top salesperson. This sort of cover provides the shareholders and business owners with comfort, knowing that the company will maintain with its operations with no major disruption in the incidence of the death of any key worker. If incapacity or death strikes the key person of your business, key man life cover might be the difference between the business's ultimate success and its demise.
Many individuals have the wrong idea that key man life cover is similar as life assurance. Even though life assurance is one of the most important features of a good keyman insurance. That is because the risk of incapacity that is caused by injuries or health issues is as real as the risk of demise.
Variations between personal life assurance and key man assurance
The difference between personal life assurance and key person assurance is essentially the way the policies are put together. An individual life assurance policy protects the insured person and offers benefits of the deceased to the spouse or children for personal expenses. More often than not the insured person and the policy owner are one and the same. The benefits of the deceased can only cover his/her final expenses of the funeral, or it can be made to maintain the living standards of the surviving beneficiaries for a specific period of time. Personal life insurance could be structured to act as a protection policy; that is to provide protection for the security of the beneficiary that is primarily his/her family.
Then again, on key man life cover, the key individual is the person who is insured. The business or company owns and pays premiums of the policy, and the main difference is that the beneficiary is the company. In the incidence of the key persons death, the proceeds of the death benefits goes to the company and not the key person's family. Key person assurance is there to provide liquid funds to the company to protect it against acute financial losses. A business will have to hunt for a new employee, hire, retain and train him/her. This is usually expensive and death benefits are used to cover these costs. The policy also offers a legal transition plan for shareholders on how a company will continue to function, and the cover will also cater for the expenses incurred during this transition. This policy may also be written to supply benefits to buy out stakeholders as well. Key person assurance in essence offers security protection for the company.
Personal life assurance cover
A personal life assurance policy is a formal agreement that is arranged between an insurance corporation and an individual. This company agrees to pay the individual (or their estate) an agreed figure of money upon demise. The insured usually pays premiums, either a single lump sum or regularly. The main purpose of life insurance is to provide financial security for your loved ones, particularly your family after your demise. As a result, ahead of signing for a life assurance policy, first consider your financial status and the type of life you would wish for your dependants whenever you die. As an example, would your family members have to relocate? Who will pay your final medical bill and cater for your funeral cost? Will there be adequate money for ongoing or future fees like college, mortgage repayments and daycare? It's important that you annually re-evaluate your life insurance policy especially when you change your life status and get married or get divorced. Also when you have a child or adopt a child, or purchase a major item like a small business or a house.
Key Man Assurance Cover
Key man assurance in contrast, is a type of life insurance cover that protects a business just in case of premature demise or disability of an executive, business owner, or even a top salesperson. This sort of cover provides the shareholders and business owners with comfort, knowing that the company will maintain with its operations with no major disruption in the incidence of the death of any key worker. If incapacity or death strikes the key person of your business, key man life cover might be the difference between the business's ultimate success and its demise.
Many individuals have the wrong idea that key man life cover is similar as life assurance. Even though life assurance is one of the most important features of a good keyman insurance. That is because the risk of incapacity that is caused by injuries or health issues is as real as the risk of demise.
Variations between personal life assurance and key man assurance
The difference between personal life assurance and key person assurance is essentially the way the policies are put together. An individual life assurance policy protects the insured person and offers benefits of the deceased to the spouse or children for personal expenses. More often than not the insured person and the policy owner are one and the same. The benefits of the deceased can only cover his/her final expenses of the funeral, or it can be made to maintain the living standards of the surviving beneficiaries for a specific period of time. Personal life insurance could be structured to act as a protection policy; that is to provide protection for the security of the beneficiary that is primarily his/her family.
Then again, on key man life cover, the key individual is the person who is insured. The business or company owns and pays premiums of the policy, and the main difference is that the beneficiary is the company. In the incidence of the key persons death, the proceeds of the death benefits goes to the company and not the key person's family. Key person assurance is there to provide liquid funds to the company to protect it against acute financial losses. A business will have to hunt for a new employee, hire, retain and train him/her. This is usually expensive and death benefits are used to cover these costs. The policy also offers a legal transition plan for shareholders on how a company will continue to function, and the cover will also cater for the expenses incurred during this transition. This policy may also be written to supply benefits to buy out stakeholders as well. Key person assurance in essence offers security protection for the company.
Source...