Add Up Articles Directory | Free Articals | New Articles Daily

If you only own part of your business, the chances are that you, along with the other owners, are part of a board of directors. In many instances the individual directors may not be involved in daily operations. Directors may vote on business matters, but they are not directly responsible for daily business operations. So why do you need director insurance?

What if one of your directors died? Do you know what would happen to his assets? Would you and the other owners be in a position to by his shares or ownership interests? This is where director insurance is important. It is similar to life insurance in that it would pay to retain the company assets among the surviving owners or stockholders. Generally the amount of the director insurance policy would be equal in value to the amount of his shares.

Director insurance is similar to key man protection. It protects your business from suffering a loss in the event that your directors stocks become part of his estate. The stocks cannot be sold to outside interests if you have director insurance. Instead, the company would be able to buy back the stocks and prevent someone else from obtaining any control over your company.

Key man protection is also an essential part of protecting your assets. If the loss of a particular employee or employees would result in a substantial cost or loss to your company, that employee should be covered by a key man policy. It can be expensive to recruit high level executives. Usually you need to use a recruiting service and their charges can be high. Until your new employee is trained, you can loss money since the position is not operating a full capacity.

Medium to large businesses carry director insurance and keyman protection as a matter of course. If you have started your company with money from venture capitalists, they may require that you protect their interests with this coverage.

Even if you don't have executives to replace, the chances are there are one or more employees whose loss would impact your bottom line. Keyman protection is necessary to cover employees whose contribution to your business success is substantial. It may be a salesman or a chef or a designer that is key to your success. As long as losing the employee would substantially affect your business operations, you should carry key man protection on him.

Small businesses are more likely to suffer severe business disruptions from the loss of a key employee than larger businesses. The loss of a particular employee can even interrupt your ability to carry on daily operations. Key man protection will cover you for those losses and help you replace the person with another key employee.

Any business owner should be aware of the importance of protecting all his assets against loss and this includes employees. If you are not a sole owner, you should carry partnership or director insurance as well as key man protection. You never know how your partner's or director's heirs might dispose of their personal assets. Make sure you can keep your business in your control.