Key-Person Disability Insurance in New York
Coverage that pays the company when someone the business depends on cannot work.
Key-person disability insurance is bought by the business on a person it depends on, and it pays the business, not the individual. That person might be an owner, a top rainmaker, or a technical lead. The money buys time to recruit, recover, and restructure without draining operating reserves.
- Owned by the individual
- Pays the individual
- Replaces part of personal income
- Bought by the business
- Pays the company
- Offsets the cost of losing that person's work
Ask which people the business cannot function without. A few signs:
- Revenue walks in the door because of one person.
- A license, client relationship, or technical skill sits with a single individual.
- Methods or relationships exist only in one person's head.
These map to the key-person, regulatory, and IP and knowledge pillars in the Business Financial Resilience Diagnostic (BFRD).
The business decides how to use the benefit. Typical uses include covering revenue lost while the person is out, recruiting and training a replacement, and keeping client service running while the company adapts.
There is no single formula. The usual starting point is what the business would actually lose: revenue tied to that person, the cost of finding and training a replacement, and how long both would last. Your CPA can help estimate those numbers. Insurers usually ask for financial documentation to support the amount.
- How the policy defines disability for that person.
- The waiting period before benefits start.
- How long benefits last, and the benefit amount.
- What happens to the policy if the key person leaves the company.
Key-person life insurance responds to a death. Key-person disability responds to an inability to work. Business overhead expense insurance reimburses fixed costs while an owner is disabled. Buy-sell funding pays for an ownership share. A business can need more than one, and each one does a different job.
Peter Boglo is an independent insurance specialist licensed in New York, New Jersey, Maryland, and Texas. Key-person disability is one of the business lines he places with full independent market access. He holds insurance licenses only and sells no securities products.
Related: business overhead expense insurance, key-person disability insurance, and the Business Financial Resilience Diagnostic (BFRD).
Not sure who your key people are? The Business Financial Resilience Diagnostic (BFRD) identifies them in a free 60-minute session. The household Financial Resilience Diagnostic (FRD) takes 45 minutes.