By Cory Fischbach

Most businesses have essential employees who are vital to the operation and financial well-being of the business. Losing an essential employee can be devastating to a small business, and preparing for this is a vital part of any business insurance program. Until now, this has typically been done with key person insurance (often referred to as key man insurance), which is a life insurance policy that a business takes out on an essential employee. With a new endorsement released by The Hartford on March 11th, coverage is now available for temporary absences as well.

Business Income Extension for Essential Personnel
Most business insurance policies cover loss of business income and extra expenses incurred due to a covered loss. This endorsement extends that coverage to include loss of business income and extra expenses incurred due to the unplanned absence of an essential employee. Unlike key person insurance, this coverage is triggered by anything other than termination, resignation, or retirement

The Hartford is currently the only insurance carrier that offers this type of coverage, and the optional endorsement covers up to a 90-day absence. For coverage to apply, the essential person must be absent for more than 30 days, and the employer must not have been aware of the absence for more than 30 days in advance.

Analysis
If this product is successful, I expect other companies to begin offering something similar in the near future. This is a great first step, but I think that the 90-day limit is conservative. As The Hartford and other companies become more comfortable with this type of coverage, I would hope to see options for 6-12 month limits. If you are a business owner with essential employees, I encourage you to ask your agent about your options.

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