By: Joel McKinnon
As a small business owner I am often asked “what makes you successful.” Without even thinking about it, there are a number of ways you can answer this. I have a supportive wife and family, I have the opportunity to work with some awesome local business partners, we have been blessed with loyal and amazing clients, we have the proper technology to assist us, we are lucky to represent an amazing brand in Farmers. All of that being said it centers around one thing, and the KEY to our success starts with our staff.
As a business owner if you think about it, your staff typically does it all. As your business grows you hire people to do the things you do not want to do, you hire people so you can expand, you hire people you can run a more efficient business. Our employees answer the phone, they book our calendar, do filing, remind of key tasks we need to complete, and in some cases they fully run our operation. All of this being said, as a business owner what are you doing to protect the future of your business should something happen to that key employee? If you really think about it, you are a key “employee” to your family providing the cash needed to run that “operation” – your income pays the bills, it puts food on the table, allows you to send your kids off to college etc. This is why you have personal life insurance on your self, to protect the future and well being of your family.
Now stop and think about your business, your employees are the key to your success and the future of it. As business owners we need to make sure we are taking the time to evaluate our future, we need to make sure we are protecting the business not only against fire, theft, and liability law suites, but also against the death of key employees.
Replacing a key person takes time and money and could even cost the business some of its most valuable clients during the transition.”Key Person Life Insurance” can help to bridge the gap between going bankrupt, and keeping the doors open following the death of a key employee. I found an article that gives a simple overview of how it works: “A company purchases a life insurance policy on its key employee(s), pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives the insurance payoff. The reason this coverage is important is because the death of a key person in a small company can cause the immediate death of that company. The purpose of key person insurance is to help the company survive the blow of losing the person who makes the business work. The company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner.
In a tragic situation, key person insurance gives the company some options other than immediate bankruptcy.
If the company is a sole proprietorship and employs just you and no other employees or has no other people who depend on it, then key person insurance isn’t as necessary. You’ll notice we didn’t mention your family–don’t confuse key person insurance with personal life insurance. If you have a spouse and/or children who depend on your income, then you should have personal life insurance for that purpose.”
As a business owner, the question you have to ask your self is “do you want to leave your company high and dry if something happens to you or another crucial employee?” Key Person Life Insurance will give your business the ability to regroup after a loss.
If you have questions or would like more information please give us a call.