Key Man Insurance: Why It Is So Important To Your Business

Growthink Blog

Written by Dave Lavinsky on Tuesday, March 10, 2009 ...To begin, Key Man Insurance or KMI is a life insurance policy covering a business owner, president or a key employee. The business is the beneficiary under the policy.

The fact that most venture capital firms require KMI explicitly shows that venture capital firms provide funding to PEOPLE, not firms or ideas. ...

What this does NOT mean is that you should rush out to purchase key man insurance if you are seeking venture capital. What it does mean is that you need to make sure that you have a management team that is worthy of KMI. ...

What it also means, and this applies even if you are not seeking venture capital, is that you should create systems to minimize the business risk of something happening to a key employee.

These systems can include:

• Training manuals that document key tasks performed by key personnel, so that someone else could take over their job requirements in the event that they were out of the office temporarily or long-term
• A hiring plan that allows you to efficiently recruit and train new personnel
• Constantly networking and telling people the exciting aspects of your business so that there is a pent-up demand to work at your company

You and your management team are the lifeblood of your business. You always need to be thinking about how to improve, protect and grow your team, as this will have the greatest impact on the long-term success, or lack thereof, of your business.