Many SME owners in New Zealand already protect their physical assets – insuring things like buildings, vehicles, and equipment. But few stop to think about protecting against the loss of their most valuable asset of all: their people.
In most Kiwi SMEs, you’ll find one or two key people who are vital to the ongoing operations of the business. Perhaps it’s the technical expert who knows the systems inside-out, or maybe it’s the operations manager who keeps everything running smoothly. If you’re a business owner, there’s probably someone who’s popped into your head as you’re reading this article.
So, what would happen if that person was suddenly unable to work due to illness, injury or even death?
That’s where Key Person Insurance comes in – a crucial yet often overlooked safeguard that can mean the difference between a business surviving a setback or having to close its doors.
What is Key Person Insurance?
Key Person Insurance is a type of business protection policy that provides a lump sum payment to your company if a key employee or owner dies, becomes terminally ill, or suffers a serious illness or disability.
While it can’t replace your most indispensable team members (sorry!), it will ease the financial burden if your business has to navigate this kind of disruption.
How Key Person Insurance can help
Key Person Insurance provides a financial buffer to keep operations stable, maintain confidence, and protect the value of the business while things are worked through.
Practical ways this can help include:
- Covering lost revenue or profit while the business regroups.
- Funding the recruitment and training of a replacement staff member.
- Paying down debt or securing loans during an uncertain period.
- Providing stability and reassurance to clients, investors and staff.
Why Key Person Insurance is so important for SMEs
In large corporates, there’s often enough depth in the team to absorb a loss of leadership or specialist skill provided by an individual employee (though many corporates do invest in Key Person Insurance too!).
However, in New Zealand’s SME sector – where many businesses are owner-led and operate with lean teams – the loss of one person can have an outsized impact.
For example, a construction company might rely on the owner’s network of subcontractors and relationships to win projects. Or a tech start-up could depend on one lead developer’s unique expertise to keep systems running smoothly.
In either of these cases, should the key person need to step away for a time, the business would struggle while a suitable interim replacement is found.
You can’t insure against difficult times, but you can prepare for them
Key Person Insurance is an affordable way to safeguard the future of your business and the livelihoods it supports.
Whether you’re a sole director, working in a partnership, or leading a growing team, it’s worth having a conversation about what would happen if any of your key people couldn’t be there tomorrow.
If you’d like to understand what level of Key Person cover makes sense for your business – and how it can fit alongside your other insurances – speak with one of our registered financial advisors.
They can help assess your risk exposure, determine who the key people in your business are, and tailor a policy that provides peace of mind for you, your team, and your future.
