Key Person Insurance
Business owners and other key employees spend considerable time and effort to acquire the knowledge, experience, reputation, and relationships that 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 to the business' bottom line.
Don't let the loss of a key person in your organization be the death of your business. The success of any business comes down to the quality of its people. The loss of key people creates voids, which lead to disruptions, and interruptions affect suppliers, customers, and other 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 and retain them, but when death or disability attacks a member of your company’s family, your business can be hurt in the following ways:
- Loss of confidence of creditors
- Loss of credit, orders, and a decline in customer service
- Loss of production together 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 takes away from your bottom-line
Benefits of a key person insurance program
- Creditors and employees are satisfied that the business will continue notwithstanding the death or critical illness of the key person
- Improves the ability for the business to attract and retain executive talent
- Life insurance proceeds are paid tax-free into the business in the event of death
- Policy gives immediate working capital to the business as a hedge for time lost to attract, evaluate, and train a suitable 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
- Should you pursue the critical illness solution, the proceeds are paid to the company directly and can be used as a funding tool for locum or for the benefit of the owner employee
How we help with your key person insurance needs
- Prepare risk assessment and loss quantification for your specific industry
- Tax-preferred solution can be exercised at time of need for untimely death or disability cases
- Working capital improves the ability to attract/retain talent
Losing any 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.
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.