11/03/2013 08:17
It's a common mistake that people think life assurance and key man assurance are one and the same. In actual fact, they are distinctly different and should not be confused. Read this informative article to discover the difference between these life assurance policies.
Personal life and critical illness assurance cover
Personal life assurance is a contract between the policy holder and the insurance company, where the insurance company agrees to pay a certain quantity of cash generally known as the benefits upon the death of the policy holder. The policy is paid for monthly or occassionally in a lump sum by the individual insured. The principle point of life assurance is to supply financial security to your loved ones, especially your family after your death. Therefore, previous to signing for a life assurance policy, first consider your financial status and the type of life you'd hope for for your dependants if you die. As an example, would your loved ones need to relocate? Who will pay your final medical bill and cater for your funeral cost? Will there be adequate money for ongoing or future expenses like college, mortgage payments and daycare? It is important that you annually re-evaluate your life assurance plan especially when you change your life status and get married or get separated . Also when you have a child or adopt a child, or buy a significant item like a small business or perhaps a residence.
Key Man Life Assurance Cover
Key man life cover in contrast, is a form of life insurance cover that protects a company just in case of premature bereavement or incapacity of an executive, business owner, or even a top salesperson. This type of cover grants the shareholders and business owners with reassurance, knowing that the company will carry on with its operations with no major disruption in the incidence of the loss of any key employee. 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 people have the wrong understanding that key man insurance is the same to life assurance. Even though life assurance is one of the most significant features of a good keyman insurance. This is because the risk of incapacity that's caused by injury or health issues is as real as the chance of demise.
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Differences between personal life assurance and key person assurance
The difference between personal life assurance and key man life cover is largely the way the policies are put together. A personal life insurance plan protects the insured person and provides benefits of the deceased to the spouse or kids for personal expenses. Usually the insured person and the policy owner are the same person. 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 assurance can be structured to act as a protection policy; which is to provide protection for the security of the beneficiary that is primarily his/her family.
Then again, on key person assurance, 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 business. In the event of the key persons death, the payout of the death benefits goes to the company and not the key person's family. Key man life cover is there to provide liquid finances to the company to protect it against severe financial losses. A business will have to hunt for a new employee, hire, retain and train him/her. This is usually pricey and death benefits are used to cover these expenses. The policy also provides a legal transition plan for shareholders on how a business will continue to function, and the cover will also cater for the expenses incurred throughout this transition. This policy may be written to provide benefits to buy out stakeholders as well. Key man assurance essentially provides security protection for the business.
If you want to continue reading in relation to key man assurance please go here https://ukkeymaninsurance.co.uk/7-important-insurance-policies-for-any-business/ . Go here Straight away.
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