No business owner wants to think about the worst-case scenario when it comes to their employees. But have you thought about what would happen if you lost an important member of your staff?
In your organization, there is likely one or two employees who are vital to its survival. This person may be a partner, owner, majority stockholder, or another individual who is crucial to the business.
If this person unexpectedly leaves—due to a death, disability, or immediate resignation—it may be hard to stay afloat.
If something were to happen, would you financially be able to handle the costs of hiring a temporary replacement and maintain the same revenue stream? With key person life insurance, you can ensure that your business is protected even if you lose a key member of your staff.
Who Needs Key Person Insurance Coverage?
Key person life insurance gives you peace of mind by lifting the financial worry that comes from losing a vital employee under extreme circumstances.
Key person insurance coverage is crucial for:
- Employees who would be extremely difficult, time-consuming, or expensive to replace
- Highly skilled employees with unique training
- Employees with exclusive ties to key clients
- Employees who are company leaders and have irreplaceable knowledge
- Small business owners who would face financial hardship in losing a key staff member, employee or client
How Does Key Person Insurance Work?
In the event a vital employee becomes disabled or deceased, these types of insurance provide the company with income checks to make up for financial loss or to use for temporary or permanent replacement costs.
Here’s how it works…
- The employer purchases life or disability insurance for key individual(s).
- The 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.
Premiums for the policy are based on several factors, including the key employee’s age, physical condition, and medical history.
Types of Key Person 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 17x greater than losing a key person to death.
According to the Council of Disability Awareness, 37 million Americans have a disability. Over 50 percent of that population is still in their working years. That means there is a good chance you or one of your vital employees will be unable to work due to a disability at some point in their careers.
Not to mention, the costs of hiring a recruiter to replace the key person and training them for a short period could be much higher than finding a permanent replacement.
Key person insurance is designed to provide companies with financial stability in a time of stress due to an important employee’s medical condition—that includes disability.
Get Key Person Coverage from Pasadena Insurance Agency, Inc.
At Pasadena Insurance Agency, Inc., we want to help you protect your interests.
Key person coverage can help you minimize your risks in the event that one of your key employees dies, becomes disabled, or leaves the business prematurely.
To learn about coverage options, limits, and other plan details, contact Pasadena Insurance Agency, Inc. today!