What would your business clients say is their most valuable business asset? Not surprisingly, it’s usually their key employees – those valued individuals critical to the livelihood and profitability of their business. Many employers protect their businesses in the event of their key employee’s premature death, but few are protected if the employee suffers an Illness or Injury that keeps them away from their job for a long period of time.
The likelihood of a vital employee incurring a disability is 8 times greater than death before retirement age.
These clients need to know about Key Person Replacement Insurance for Disabilities.
Your Business Clients need a New Year’s reminder of how many ways their business could suffer from a key employee’s total disability.
- Loss of revenue and profit generated by the key employee could be substantial
- Disruption of the business when clients withhold or delay their business until the impact of the employee’s disability is known
- Loss of management skill and experience, especially in a business without management depth
- Increased expenses associated with recruiting, hiring, and training a replacement
How It Works
The employer pays the premium and is the owner of the policy insuring the key employee in the event of total disability.
If the Key Employee becomes totally disabled, the employer can receive benefits after 90 days, tax free. These benefits can be used at the discretion of the business. Common uses usually include bridging the lost revenue gap, training a replacement, and filling temporary staffing needs. The benefits cannot be assigned to the employee. The maximum amount available is based on a calculation of 150% of the employee’s monthly income.
Benefits can be paid in either in a lump sum after 365 days or paid in monthly installments after 90 days for 12 month.
Who Is A Key Employee?
Typically, a key employee is someone who:
- Is critical to the livelihood of the business
- Has significant impact on sales
- May or may not be one of the owners
- May have a special rapport with customers or creditors
- Is responsible for management decisions
- Is highly paid
Key Person Replacement insurance is ideal for small to medium sized businesses, specifically those with employees who have specialties or experience that is not easily replaced, such as medical professionals, attorneys, engineers/IT Programmers, architects, and CPAs.