Key-person insurance insulates businesses against the losses sustained when an essential employee or stakeholder dies or is disabled. With 71 percent of firms admitting that their continued success is dependent on one or two people, there is no question that key-person insurance is a critical protection for all your business-owning clients. Yet, very few of them have this coverage.
Ironically, policy cost may have something to do with the decision— but this is where you can help. By introducing the right clients to a premium financing arrangement, you can help them protect their company against the unexpected loss of their most influential leaders and prepare themselves financially for sudden tragedies without having to tap into company capital.
Protecting C-Suite Employees
Executive-level employees oversee most staff members and projects, which means their death or sudden disability can disrupt operations across the whole enterprise. Because of the high visibility and importance of their roles, businesses will want to fill that vacancy immediately. Easier said than paid for, according to Josh Bersin of Bersin by Deloitte, who famously said rehiring and training new staff can cost as much as twice the position's annual salary.
There's no denying that a business's recovery after the death or disability of an executive depends on the amount of disposable capital available to recruit and hire a replacement, which may involve long interviewing cycles, relocating choice talent, training, etc. Key-person insurance provides that capital immediately.
The Means to Pass On High-Maintenance, High-Spend Accounts
Perhaps the employee in question isn't a C-suite member but does handle large, valuable accounts or demanding clientele. Could their sudden absence cause customers to terminate? Could the loss of the employee result in service delays that create contract breaches? Would the losses be enough to put the greater business at risk?
It's always a possibility. Even the most well-meaning plan for continuity won't prevent clients from cutting ties with a business after their representative is gone. Key-person insurance temporarily girds the policy-holding company from losses and can give them the capital necessary to replace the employee before client attrition occurs.
Replacing a Unique Set of Profitable Skills
Key people often generate revenue through newer, narrower channels, whether through their personal and professional connections, innovative practices, or a specific talent that the business depends on for order and service fulfillment. When a uniquely talented individual is lost, the company can find its income quickly drying up with few options for recovery immediately available. Key-person insurance can help the business maintain operations until new talent is secured, and pay for training that allows another employee to serve as a replacement.
Don't let your clients wait to free up enough capital to secure key-person insurance. Speak with a financial services manager at GFD today to discover how Leveraged Planning® solutions can help your clients maintain business security.