How life cover and key man assurance are incredibly different

wesbite People often think that personal life assurance and key man assurance are identical. In point of fact, they are very different and shouldn't be confused. To help you understand the underlying difference between the two please carry on reading.

Personal life assurance cover

A personal life insurance policy is a formal contract that is agreed between an insurance business and an individual. This company agrees to pay the person (or their estate) an agreed sum of money upon demise. The insured usually pays premiums, either a single lump sum or regularly. The principle purpose of life assurance is to provide financial security for your loved ones, particularly your family after your death. Hence, previous to signing for a life insurance policy, first consider your financial status and the kind of life you'd want for your dependants when you die. For example, would your family need to relocate? Who will pay your final medical bill and cater for your funeral cost? Will there be an adequate amount of money for ongoing or future fees like college, mortgage payments and daycare? It is important that you annually re-evaluate your life insurance strategy especially when you change your life status and get married or get separated. Also when you have kids or adopt kids, or buy a significant item such as a business or even a residence.

Key Person Life Assurance Cover

Key man assurance on the other hand is a type of life assurance cover that protects a company just in case of premature demise or incapacity of an executive, business owner, or a top salesperson. Any such cover gives the shareholders and business with reassurance, knowing that the company will maintain with its operations with no major disruption by the incidence of the death of any key employee. If incapacity or demise strikes the key person of your business, key person assurance could possibly be the difference between the business's ultimate success and its demise.

Many people have the wrong understanding that key man life insurance is the same to life assurance. Although life insurance is one of the most essential features of a good key man life insurance. That is because the risk of incapacity that is caused by injury or sickness is as real as the chance of demise.

Distinctions between personal life insurance and key person assurance

The difference between personal life assurance and key person assurance is basically the way the policies are put together. A personal life assurance policy protects the insured person and offers benefits of the deceased to the spouse or children for personal expenses. Usually the insured person and the policy owner are one and the same. The benefits of the deceased can only cover his/her final expenses of the funeral, or it can be made to keep the living standards of the surviving beneficiaries for a specific period of time. Personal life assurance may 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.

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On the other hand, on key man assurance, the key individual is the person who is insured. The business or company owns and pays premiums of the policy, and the primary difference is that the beneficiary is the business. In the incidence of the key individual's death, the payout of the death benefits goes to the company and not the key person's children or spouse. Key person insurance is there to offer liquid finances to the company to protect it against serious financial losses. A business will have to search for a new member of staff, hire, retain and train him/her. This is generally expensive and death benefits are used to cover these costs. The policy also offers a legal transition plan for shareholders on how the business will continue to function, and the cover will also cater for the expenses incurred during this transition. This policy may be written to provide benefits to buy out stakeholders as well. Key man life insurance basically provides security protection for the business.