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A key man is usually defined as some one whose knowledge and expertise and services are indispensable to the operation of a business or organization. If this person were suddenly unable to do his job, the business would face substantial losses or fail to grow as expected. Key man insurance is designed to protect business against this type of loss.

Premiums for key man insurance are determined in much the same way as for other life insurance policies. The age of the employee, his health and family history are all considered. Tax law treats key man premiums in much the same way as other business insurance. It is a business operation cost. No matter what size your business is, if it is dependent on one or two key employees, you need key man insurance.

If you are a business owner, or major stockholder, you are a key man. You may not have considered this before, but could your business continue without you? In order to protect all your hard work, you should have key man insurance on yourself as well as your employees. You didn't work all your life to leave your loved ones a business that is essentially worthless without you. You also want to protect your employees livelihoods which might be severely disrupted by your sudden death or disability.

If you are part of a medium sized business that operates with a board of directors that all own a piece of the company, you should consider another type of key man insurance called director insurance. If one of your co-owners died, do you know what would happen to his assets? Would you and your fellow owners have enough capital to buy his shares? Director insurance means that you will be able to retain the shares within the company. It will give you the capital to buy back the other director's shares rather than risk having them sold to outsiders.

One form of director insurance is called first to die. This insurance pays on the death of any one director and a new policy with the same terms can be purchased after the claim is collected. The premiums on this type of policy are typically lower.

Partnership insurance is another type of director insurance. It provides the funds for one partner to buy the other partner's assets in the company in the event of his death. No one who owns a partnership style business should be without partnership insurance. If your partner's heirs want to sell his interest in the business and you don't have the capital to buy them out, what will happen to your business?

Insurance is an essential part of doing business. It protects your company's physical assets like buildings and vehicles. If provides for protection of your business assets if an employee or other person is injured during the course of business. You already insure many of your business's assets, shouldn't you insure the biggest assets you have in the form of your key employees?

Key man insurance, director insurance and partnership insurance are all ways to protect both your personal and business assets from unforeseen loss. Just as you have life insurance to protect your family from loss of income, you need key man and director insurance to protect your business.