Tuesday, November 11, 2014

Key Person Replacement – Disability Insurance

What would you say is your most valuable asset? Not surprisingly, for most business owners it’s usually their key employees – those critical to the livelihood and profitability of the business. Many employers protect their businesses in the event of their key employee’s death, but few are protected if the employee suffers a total disability. The likelihood of a vital employee incurring a disability is 8 times greater than death before retirement age. If you own a business you should take a serious look at Key Person Replacement Insurance for Disabilities.

The Need
How many ways could your business suffer from a key employee’s total disability.
·         Loss of management skill and experience, especially in a business without management depth
·         Disruption of the business when clients withhold or delay their business until the impact of the employee’s disability is known
·         Loss of revenue and profit generated by the key employee could be substantial
·         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 employee becomes totally disabled, the employer can receive benefits after 90 days, generally 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 twice the employee’s earned income up to a maximum of $500,000.
Benefits can be paid in either in a lump sum or paid in monthly installments.

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

Who Needs It?
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.
For more information and availability of Key Person Replacement Disability Protection, contact Point One Insurance at 760-302-4545.