CBIZ INNKEEPERS INSURANCE BLOG

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Ward, Hayden
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Key Person Insurance for Inns

Key Person Insurance for Innkeepers

Did you know you can protect your business with insurance if something happens to one of its vital employees?

Many inn businesses employ at least one individual who is essential to the company’s success. This person may be a partner, owner or another individual who is crucial to the inn. If this person unexpectedly leaves the organization—due to a death, disability or immediate resignation—it may be hard for the bed and breakfast to survive.

If your business employs individuals who are vital to its success, key-person life insurance or key-person disability insurance can help protect you from the chaos caused by their abrupt absence. These insurance solutions can give your organization options other than immediate bankruptcy should you lose your company’s key person or people without warning.

Who Needs Key-person Life or Disability Coverage?

Many businesses can benefit from key-person life or disability coverage, including those that:

  • Have employees who would be extremely difficult, time-consuming or expensive to replace, such as central decision-makers, vital managers or employees whose ideas have a critical impact
  • Employ highly-skilled individuals with unique training
  • Employ leaders with irreplaceable knowledge
  • Would lose considerable business and profit without a certain employee

In the event a vital employee becomes disabled or deceased, these types of insurance provide the company with income checks to make up for financial loss or to use for temporary or permanent replacement costs. Owners should purchase separate policies for each key employee at the inn.

How Does Key-person Coverage Work?

  • Employer purchases life or disability insurance for key individual(s)
  • Employer is the beneficiary of the insurance policy and owns the policy. If the key employee dies, the policy pays out to the employer.
  • Tax-free dollars from the policy can be put toward finding, hiring and training a replacement employee, compensation for lost business during the transition and/or financing timely business transactions
  • The policy can be transferred to a departing key employee as a retirement benefit or to a different key individual upon the retirement of the original key employee
  • Can be used to buy out the key employee’s shares or interest in the company

Key-person Disability Insurance vs. Key-person Life Insurance

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.

Considerations Before Purchasing Key-person Life or Disability Insurance

  • Estimate the value of your key employees.
  • Determine if this coverage is necessary, as credit insurance will cover outstanding loans and debts.
  • Create a business continuation plan that outlines how your business will function if you lose key employees.

How Much Does Key Person Insurance Cost?

Depending on how many key employees your bed and breakfast business has, you’ll need to purchase separate policies for each one. How much you’ll pay will varies on a few different factors:

  • The insured’s total compensation (To qualify as a key person, most insurers require that the employee’s salary be in the top 20% of the company).
  • The age and physical health of the insured.
  • The amount of coverage your business needs.

Requirements and Coverage Options

To obtain key-person disability or life coverage, the individual must be a consenting employee and you must demonstrate that your inn business would incur substantial financial loss without them. All key-person policies are written specifically for the employee in question. To learn about key person coverage options, limits and other plan details, contact CBIZ Life Insurance Solutions today.

To learn more about protecting your inn business through CBIZ Innkeepers Insurance, connect with a member of our team.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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CBIZ Innkeepers Insurance, a division of CBIZ Insurance Services, Inc., is the largest insurer of innkeeper businesses in the United States. As part of an $850 million New York Stock Exchange traded company (CBZ), we developed a specific policy coverage to meet the needs for inns and bed & breakfasts, and the amenities offered by these businesses. Our policy is underwritten by an A.M. Best Rated A++ (Superior) company.

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