Certain people are key to the growth and stability of your company. Examples would be executives managing vital company output and top salespeople who drive the income. Loss of one of these individuals can impact the company financially, often well into the six figures.
Key Person Life Insurance
In the event of the death of a key employee, your business can suffer immediate and catastrophic expenses, expenses that can impact your business for years to come. Key person insurance is an inexpensive way to cover this loss, and ensure that your business does not suffer from the subsequent financial disruption.
How It Works
A key person policy is straightforward – a number for the total loss is compiled and an inexpensive term life insurance policy is put in place. In the event of the death of the key person, your business now has immediate cash to replace the lost revenue and hard costs. Typically an inexpensive term life insurance policy is used for this purpose, though other options are available that can be used as an incentive and benefit for your key employees.
Is This Right For You?
Take your top salesperson; you would lose revenue from their sales until you’ve recruited and trained a replacement, which could be six months or longer. That loss of sales is definable and directly impacts your company. Recruiting is another expense, which can run to 30-40% of their compensation. And once a new salesperson is recruited, there’s going to be a period where they train and slowly rebuild relationships – another extended duration of lost revenue.
You can either suffer the financial loss, or cover it with a straightforward key person life insurance policy.