In a service business, the most valuable asset often walks out the door every evening. Here’s how to think about protecting the business if that person can’t work.
Ask a service business owner what their most valuable asset is and you’ll hear about clients, reputation, or the team. Ask what happens if they personally couldn’t work for six months, and the conversation usually gets quiet.
When you are the engine
In many small firms, one or two people hold the key relationships, the expertise, and the sales pipeline. If one of them is suddenly unable to work, revenue can drop quickly while fixed costs keep running.
What key person coverage is designed to do
Key person coverage is life or disability insurance owned by the business on someone whose absence would materially affect it. If something happens, the benefit goes to the business, giving it time and capital to recruit, retain clients, or wind down responsibly.
Questions worth answering now
Which people would the business struggle to operate without?
How long would it realistically take to replace their contribution?
What would the business need to cover during that time?
Do partners have a funded plan for buying out each other’s share?
Protection planning works best before it’s urgent. A short review of what’s already in place, and where the gaps are, is often enough to know whether action is needed.
This article is general education, not insurance or legal advice. Coverage needs depend on your specific situation and should be reviewed with a licensed professional.
