Pay Attention of Key Person DI
I have a great affinity and enthusiasm for income protection insurances and the often-underestimated value of disability coverage. Like many other DI advisors in the industry, we tend to regularly sing the praises of personal DI as well as buy/sell and business overhead expense disability benefits, which in standard form, are readily available to the masses through domestic disability carriers.
Yet, there are other, more undervalued, but very profitable programs that you might consider making part of your repertoire.
Although many advisors fail to properly or completely approach the subject of key person insurance, every business, professional firm, profit and non-profit organization, charity, church and educational institution has at least one and sometimes several members of their company who are critical to the completion of that organization’s philosophical mission and ultimate financial stability. Protecting against the loss of services of a key person due to death is common practice, but key person coverage shouldn’t stop at life insurance. Our aim is to educate and allow our clients to realize that key person protection is crucial for loss of services due to the total or partial disablement of certain employees or employers. Key person DI is incredibly important.
The physical loss of a key employee or employer will most likely lead to the loss of present and future business accounts, the loss of relationships with important contacts, not to mention the office workflow issues that would inevitably arise. Additionally, corporate capital would have to be allocated to finding a replacement employee who would then need to be trained and paid an appropriate salary. The actual costs of the loss of a key person due to disability can easily put a company into significant chaos, at least in the short term, both operationally and financially.
The insurance proceeds, typically paid on a monthly basis after a short elimination period, can be used however the policy owner sees fit and are intended to force a temporary corporate renaissance, allowing the hiring and training of replacement employees to assist in firm progression or to economically steady the company for an eventual buy-out.
Key person products are few and far between in the U.S. markets, but they are proven integral assets for disability financial planners in protecting businesses vulnerable to dissolution. In consideration of the often-sudden nature of disablement, any business finding success under the guidance and tutelage of a key person is at risk.