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Protecting What Matters Most


Do You Have This Critical Insurance Plan for Your Medical Practice?

When you own a successful medical practice there are many people that have helped you grow it. Your amazing team, the ones your practice couldn’t survive without, have had a hand it your success.

According to the National Association of Insurance Commissioners, small businesses are extremely dependent on just a few key people for their success, and 71% say that they are “very dependent” on only one or two key people.

That’s why you should consider purchasing key person life and key person disability insurance for your practice.

Explaining Key Person Life & Key Person Disability Insurance

What is key person insurance?

It is an insurance policy on a key employee in which the owner and beneficiary of the policy is the business. Key person insurance compensates your practice for the financial loss due to an employee disability or death. In some instances it is also called key man insurance. Basically, it’s insurance for the key people in your business for the protection of the business. Just to be clear, while you’re insuring a person, you are doing it for the benefit of your practice should that key person not be able to work in your practice due to death or disability.  

Ok, got it. Now how does it work?

There are two types of insurance for your key people. 

  1. Key person long-term disability insurance: If one of your key employees becomes disabled, this coverage provides a monthly payment to your practice until your employee can get back to work. Typically, the amount of this benefit reflects the value of your key person and it’s separate from other disability benefits issued to your employee.
  2. Key person life insurance: A loss of a key employee will most definitely leave your practice saddened by the loss, but also void of their expertise. In addition, you may have a financial loss while you try to find a replacement. This insurance coverage will help you maintain the financial stability of your organization until you can hire someone new.

Who is a key person?

Obviously, everyone that works with you has a specialty and they are very important for your thriving practice. However, there may be a handful of people who you know are key drivers.

By law, there is no definition of a key person. So, really it’s up to you to determine who your key persons are. To help, here are a few questions to ask yourself when choosing your key employees.

  • Is this skill something hard to replace?
  • Will future profits be interrupted?
  • How long would it take to hire the right person?
  • How much time would it take to train the right person?

For most companies, the owner, founder and anyone whose skill set and knowledge is essential to the growth of your organization are key people. So even though there are other important people in your company, you only want to insure the key people that help your business the most.

Valuing a Key Employee

So here’s where it gets a little more awkward. Now it’s time to determine a monetary value for the key persons you choose. You have to put a value on your employee to know how much insurance you need.  This is something no one wants to do. So to ease your anxiety, you’re not evaluating how important this person is to their community or to their family, you are just establishing a value in regards to your practice.

To help you place a monetary value on your key persons, here are some key factors to consider:

  • How many total employees you have
  • How many of those are key employees  
  • How difficult will it be to replace the key employees

Knowing this type of information can give you a budgetary range where insurance coverage is concerned. For example, if you have 3 key employees that are considered difficult to replace, the monetary range could be 2 to 7 times their salary.

Do I really need it?
“Key-person insurance is very important,” says James Prescott of Texas Medical Association Insurance Trust (TMAIT). 

Basically, whether you have a new or existing practice, you want to protect it. Financially, having key person insurance can help you keep your business going and growing if one of your key people are absent.

At TMAIT we know how big of a decision key person insurance can be, our experienced team can help you weigh your options when it comes to the insurance coverage for your practice. Contact us to learn more about what type of key person insurance best fits your practice. 


Speak with a TMA Insurance Trust Advisor:

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