Key Person Protection

How will the loss of the key person affect your business?

There are too many business owners who have not considered the adverse effects to the business if something unexpectedly happened to them or one of their important employees.

KEY PERSON PROTECTION

Key person insurance protection involves the use of life insurance, disability insurance or critical illness insurance to create immediate working capital for a business to meet immediate cash needs and to find a replacement in the event of the death of a business owner or a key executive.

How much Key Person life insurance do you need?

Unfortunately, there is no easy answer to this question. Determining the right amount of key person insurance is not an exact science. Calculations vary from a simple multiple of earnings to detailed calculations that take into account numerous factors. Outlined below are some of the factors to consider and questions to ask your client when trying to determine the amount of key person insurance.

Will the loss of the key person affect cash flow?
How will business credit be affected?
Are there going to be training and recruiting costs?

Using life insurance to protect a business from the death of a key employee is a common practice in the business market. It is important to understand that determining the right amount of insurance is not an exact science. In as much as there are needs analysis tools available, they really are just a starting point.