Key Person Insurance For Law Firms
Most law firms have at least one individual who is essential to the firm’s success. This person may be a partner, management team member, majority stockholder or someone with unique expertise or a business-critical skillset.
When a key person leaves, your firm will likely be faced with a significant resource gap. If a key person’s exit is a planned retirement or voluntary termination, you’ll have time prepare and take the necessary precautions to minimize the impact.
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However, if their departure is unplanned due to a sudden, disabling accident, your firm will be exposed to financial risks. Key person insurance for law firms is designed to help offset this risk. This insurance coverage can protect your firm’s solvency in the event that you lose the key person or people without warning as well as the investments made by lenders and investors.
Insurance Coverage For Key People at Your Firm
Key person insurance for law firms coverage generally includes individuals who are among the top 20 per cent of salary-earners, such as:
- Those who would be extremely difficult, time-consuming or expensive to replace
- Highly skilled staff with unique training
- Partners with exclusive ties to key clients
- Partners who are company leaders and have irreplaceable knowledge
In addition to proper coverage, a business continuity plan that outlines how your law firm will function if you should suddenly lose key people is essential.
Coverage That Helps You Fill A Resource Gap
With key person insurance for law firms coverage, the firm pays the premiums and serves as the beneficiary in the event of a disability. Tax-free dollars from the policy can be put toward finding, hiring and training a replacement, compensation for lost business during the transition and/or financing timely business transactions.
A key person policy is used to protect your firm, not the key employee—if the key person becomes disabled, key person insurance for law firms coverage proceeds can be used by the firm for any purpose. Premiums are based on several factors, including the key person’s age, physical conditions and health history. The amount of coverage also affects the premium.
In addition to proper coverage, a business continuity plan that outlines how your law firm will function if you lose key partners is an essential risk management tool.
An ALIGNED Advocate can provide more information about key person insurance for law firms as well as continuity planning. Talk to one of our advocates today about how we can help you secure the best products, services and insurance solutions for your organization.
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Sources: © 2009-2012, 2014 Zywave, Inc. All rights reserved. For informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage.