BUSINESS RESILIENCE
Most organizations employ at least one individual who is essential to the company ’ s success . This person may be a partner , owner , majority stockholder , or another individual who is crucial to the business . If this person unexpectedly leaves the organization — due to death , disability , or immediate resignation — it may be hard for the organization to survive .
These insurance solutions can give your organization options other than immediate bankruptcy should you lose your company ’ s key person or people without warning .
WHO NEEDS KEY-PERSON LIFE OR DISABILITY COVERAGE ?
Many organizations can benefit from keyperson life or disability coverage , including those that :
• Have employees who would be extremely difficult , time-consuming , or expensive to replace such as central decision makers , chief executives , vital sales managers , or employees whose ideas have critical commercial impact
• Employ highly skilled individuals with unique training
• Employ people with exclusive ties to key clients such as sports stars
• Employ leaders with irreplaceable knowledge
• Would lose considerable business and profit without a certain employee
• Have narrow profit margins and would be financially distressed in the event of a key staff loss
• Need to protect their revenue stream from loss ( e . g ., a hospital protecting against the loss of a high-earning , respected surgeon )
• Would be devastated if a high-revenueproducing client ( e . g ., actor , writer , or other entertainer ) died or became disabled and unable to perform
In the event a vital employee becomes disabled or deceased , key-person insurance
IF YOUR ORGANIZATION EMPLOYS INDIVIDUALS WHO ARE VITAL TO ITS SUCCESS , KEY-PERSON LIFE INSURANCE OR KEY-PERSON DISABILITY INSURANCE CAN HELP PROTECT YOU FROM CHAOS CAUSED BY THEIR ABRUPT ABSENCE . provides the company with income to make up for financial loss or to use for temporary or permanent replacement costs . Business owners should purchase separate policies for each key employee at the company .
HOW DOES KEY-PERSON COVERAGE WORK ?
• Employer purchases life or disability insurance for key individual ( s ).
• Employer is the beneficiary of the insurance policy and owns the policy . If the key employee dies , the policy pays out to the employer .
• Tax-free dollars from the policy can be put toward finding , hiring , and training a replacement employee ; compensation for lost business during the transition ; and / or financing timely business transactions .
• The policy can be transferred to a departing key employee as a retirement benefit or to a different key individual upon the retirement of the original key employee .
• Can be used to buy out the key employee ’ s shares or interest in the company .
• Premiums are based on several factors , including the key employee ’ s age , physical conditions , health history , and the amount of coverage
KEY-PERSON DISABILITY INSURANCE VS . KEY-PERSON LIFE INSURANCE
When most business leaders think of purchasing key-person coverage , they turn to life insurance . However , industry leaders point out that the chance of losing a key person to disability is 17 times greater than losing a key person to death , and the costs of hiring a recruiter to replace the key person and training him or her for a short period could be much higher than finding a permanent replacement .
CONSIDERATIONS BEFORE PURCHASING KEY-PERSON LIFE OR DISABILITY INSURANCE
• Estimate the value of your key employees . Think about the projects that would be lost without these people and the amount of sales that are generated by these people , as well as the costs associated with replacing them .
• Determine if this coverage is necessary , as credit insurance will cover outstanding loans and debts .
• Create a business continuation plan that outlines how your business will function if you lose key employees .
REQUIREMENTS AND COVERAGE OPTIONS
To obtain key-person disability or life coverage , the individual must be a consenting employee and you must demonstrate that your organization would incur substantial financial loss without him or her . To qualify as a key person , most insurers require that the employee ’ s salary be in the top 20 % of the company . All keyperson policies are written specifically for the employee in question . To learn about coverage options , limits , and other plan details , contact Spectrum Insurance Group today . +
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