Key Person Insurance
Business owners and key employees spend considerable time acquiring the knowledge, experience and reputation to make them valuable to the business. When they suffer life-threatening illnesses or die, the business loses a key member of the management team and this can have a severe financial impact.
Don’t let the loss of a key person in your organization be the death of your business. The loss of key people creates voids, which leads to disruption, and disruption affects suppliers, customers, and business stakeholders. Our commercial insurance team can shield you from this situation.
The risks of losing a key individual
You work hard to attract talent, but when death or disability happens, your business can hurt:
- Loss of confidence by creditors
- Loss of credit, orders, and a decline in customer service
- Loss of production with the specialized talent equals profit loss
- Loss of staff due to attrition or competition poaching
- Loss of technical expertise equals loss in competitive account competitive market positioning
Incurred costs in hiring and training a replacement
Reliance tip for Key Man Insurance
Key person insurance is when a company purchases a life insurance or disability insurance policy on a key employee or owner. Accounting professionals recommend a multiple of salary (3x) to account for recruitment costs, cash flow, and account loss.
Benefits of key person insurance
- Creditors and employees are satisfied that the business will continue after the death or critical illness of the key person
- The business can attract and retain executive talent
- Life insurance proceeds are tax-free in the event of death
- Immediate working capital provided to the business as a hedge for time lost to attract, evaluate, and train a replacement
- Life insurance proceeds received by a private corporation as a consequence of death credit the capital dividend account of the company and permit the payment of tax-free capital dividends to the CDA, less the ACB of the policy
- For the critical illness solution, proceeds are paid directly to the company and can be used as a funding tool for locum or for owner-employee benefit.
How we can help with your key person insurance
- Prepare risk assessment and loss quantification for your specific industry
- The tax-preferred solution can be exercised at the time of need for untimely death or disability cases
- Working capital improves the ability to attract/retain talent
Losing a key person does not have to result in business losses. Talk to one of our experts at Reliance Insurance, and we can provide you with solid solutions.
You may need:
Business Interruption Insurance
Prevent loss of income if your premises are damaged.
Liability insurance can protect you, your staff, your customers and even your suppliers.
Directors & Officers
As a director or officer, protect yourself from being sued.
Protect against liability for bodily injury or property damage claims arising out of your products.
In the insurance business, it's about having the right Insurance company to understand your business and champion your claims if any arise. Reliance has provided very competitive quotes and exceptional service for 30 years.
— CFO, IPAC Chemicals Ltd.
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