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Key Man

Key person insurance, also formerly called key man insurance, is an important form of business insurance.

Key person insurance, also formerly called key man insurance, is an important form of business insurance. There is no legal definition for “key person insurance”. In general, it can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy. The policy’s term does not extend beyond the period of the key person’s usefulness to the business. The aim is to compensate the business for losses and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.

An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.

Business Solutions

You also Know the importance of keeping the books balanced, hiring qualified employees , beating the competition and meeting ever-increasing customer service expectations.

You also Know the importance of keeping the books balanced, hiring qualified employees , beating the competition and meeting ever-increasing customer service expectations.

But until you address the issues of retirement planning, business continuation and rewarding and retaining key employees, everything else could be in jeopardy.

What would happen to your Business, in the event of you death, retirement or even if you were to become disabled? Your Dream, your time and energy that you have spent to create this business would be jeopardized. In-turn with the appropriate business continuation planning, you can ease your worries and safeguard your business. You will have created a foundation to were you business will continue in succession after you are gone.

What is business continuation planning?

Simply put, business continuation planning is the process of defining and implementing a plan of succession. We define and assist in creating a Buy-Sell Agreement, Proper business continuation planning will establish who will run your business in the event you become disabled,retire or die prematurely.

Ensuring the continuation of your business with a properly drafted Buy-Sell Agreement will provide more than just a mechanism for transferring the business. It may save you thousands of dollars — and hours — by eliminating the costs, delays and frustration of IRS contests and litigation. When properly drafted, a Buy-Sell Agreement will establish the value of a business for the purposes of federal estate and gift taxes.

Did you Know …

  • Only about 1/3 of small of small businesses offer some kind of retirement saving program to employees. Fewer than 10 % offer non-qualified programs for the owners and executives.
  • Life insurance is not a top priority for these business. Group life is the least common employee benefit, only 1/3 have business life insurance for such things as key person coverage, and life insurance is next-to- last executive benefit the firms would bring in.
  • Seven in 10 small business owners have thought about who would run the business in their absence, but only 25% have formal retirement succession plan and only 35% have formal continuation plans in the event of their death.
  • Family -owned businesses are less prepared for future transition than non family businesses.
  • Just over half have personal IRA’S and fewer than 20% have annuities or pension plans.

Source : Small Business Owners 2009. LIMRA Int’l, 2009 James O. Mitchel

Finding Whats Right For you

Are you a business owner? Don’t make the mistake of owning a business without a good financial plan at work for you and your employees. You have worked too hard and have too much at stake to not spend a few minutes with one of our trusted advisors.

As you maintain and expand your business, there are important goals to discuss and many ways to maximize your profit. Increase your likelihood of success now and spend a few minutes learning about what steps you can take now to increase your profitability and success.