Key Person DI
Let me pose a simple, straightforward question, and I hope you can put emotion aside. What would happen to your business if you became disabled and were unable to work for a period of time or even at all ever again? Now I want you to really try to give this sincere, unbiased thought, and imagine the horrific financial consequences from a corporate perspective.
If you are an independent agent or an agency owner, the probable answer is that you would have to attempt to sell your book of business quickly or let your staff go and close-up shop to keep from hemorrhaging capital. If you are an employee of a larger outfit, your inability to personally manage your accounts could cause great financial detriment, especially in the short term, to those that employ you. Take a moment to realize that your clients, no matter their line of work, likely face those same potential predicaments. What happens when a key person to a business becomes disabled? The simple answer is that the business suffers and can eventually have to fold.
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, both operationally and financially.
Businesses need short-term insurance solutions to minimize corporate risk against the disablement of an owner or key employee. Key person disability insurance is the best solution. Policies provide total and partial “own occupation” disability benefits after a short waiting period of usually six or fewer months. Monthly benefits can be scheduled for payout periods from six to 24 months, allowing for the insurance to pump much needed cash back into the affected business. Alternative benefit options of large lump sum payments are also usually available.
The insurance proceeds can be used however the powers-that-be see fit, and although the premium payments aren’t tax-deductible, the benefits are paid to the company tax-free. The monthly benefits are meant to force a temporary corporate renaissance to hire/train a replacement employee for the progression of the firm or to economically steady the company for an eventual buy-out.
Key person disability insurance is an integral part of corporate succession planning and should be every bit as crucial to your clientele as life insurance in minimizing business risk.
Petersen International has both individual and guaranteed-issue group programs available for key person DI. Call us at (800)345-8816 for insurance quotes and more information.