The Value of Key Employee Insurance
Can your small business risk not having it?
What kind of financial loss would your business face without its key employees? These employees are worth more than their salaries; their performance, professionalism, and character make your company what it is and provide the stability and predictability you need to realize a profit.
Because of this reality, wise business owners might consider key employee insurance.
Aren’t the premiums for key employee insurance sizable? Not necessarily. In fact, they may seem insignificant compared with the financial hit your company could take without a key worker.
If you lose an executive, a manager, or a salesperson who has built core relationships for your business, you’re looking at the possibility of decreased revenue for the company, the cost of recruiting and training a replacement, potentially expensive snafus if that replacement screws up, and even client or customer attrition (to some of your customers or clients, things may “never be the same”).[1]
The cost of coverage depends on several factors: the amount and type of coverage, the nature of your business, the medical histories and ages of the insured parties, and the estimated expenses and profit loss that could occur as a result of their death and disability.[1]
What are the potential advantages of having this insurance in place? First, there are financial benefits available to compensate your firm for the income loss related to the loss or disability of the worker. The presence of these benefits may reassure creditors, lenders, and vendors if a seemingly essential employee dies. If your business is incorporated, the insurance benefits can help alleviate the concerns of investors and shareholders.[1]
Some tax factors to note. Doing business without key employee insurance can be risky—a financial risk that your company could do without. To address that risk, look at some of the coverage available; relatively speaking, it may prove a bargain.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations
1 - entrepreneur.com/encyclopedia/key-person-insurance [5/30/19]
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country's leading professional association of fee-only financial advisors.