Protecting Your Business

As a business owner, are you concerned about your company's reliance on a few key people? If one becomes disabled or dies, do you have a contingency plan to carry on business? Consider Key Person Insurance to protect against the loss of those top employees.

Many businesses are often at risk of being dependent on the expertise of just a few key employees. A key employee within an organization could be defined as anyone who is responsible for managerial decisions, a person who may be a leading contributor to the sales force or perhaps someone who maintains crucial customer relationships. The death or disability of that key person could significantly impair the growth or stability of the business. To reduce this impact, some businesses purchase Key Person Insurance to protect against the loss of these top employees.

Key Person Insurance can be used by having the company purchase a life and/or disability insurance policy on each key person in the organization. The company pays the premiums and is the designated beneficiary should a key person die or become incapacitated. The company can then use the insurance benefit, which it receives tax free, in whatever manner deemed fit to ensure the viability of the business. The company may use the policy proceeds to account for a variety of responses triggered by the death or disability of the key person.

Benefits of Key Person Insurance:

• Indemnity for the possible decreased cash flow from potential lost clients or the lost confidence of suppliers
• Pay off creditors who may call outstanding loans or increase interest on debt
• Purchase the deceased or disabled person's shares in the company
• Offer financial assistance to the family of the deceased or disabled person
• Recruit or train a qualified replacement for the key person's position

Key Person Insurance should be considered as part of your overall business plan. In conjunction with an Estate Planning Specialist^*, we can help you in the development and implementation of your business succession plan.

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