In every successful business, there’s always a handful of people you couldn’t do without. Some are out in front. Others, behind the scenes. Either way, they are the people who make the business go. Without them, the business owner would be lost.
Maybe it’s the top sales person, bringing in more revenue than everyone else. Or the office manager who takes care of the day-to-day tasks — tasks that everyone else doesn’t even realize need to be done. Or it’s the programmer who provides the skills needed for technology to be an asset instead of a headache. It could be all three.
Think about your business owner clients. What would they do if they lost an irreplaceable person? Would they have to close the doors? Or sell the business?
In our industry, we’re committed to planning for the future. We protect individuals, families, and businesses from life’s “what ifs.” We help them prepare financially. And we help them avoid risk whenever we can.
When working with your business owner clients, don’t overlook the need for key person disability insurance.
There’s a good chance that you’ve talked to your business owner clients about purchasing life insurance on key employees. If that’s the case, they’ve already identified those essential people who drive the success of the company. If not, that’s the first step. Talk to your business owner clients and figure out who they consider to be key employees.
Once identified, discuss what the employer would do without them. Although we often look at life insurance first, there’s a higher chance that the person will become disabled, not die. Fortunately, we can protect against that.
Key person disability insurance (DI) helps a business owner replace lost revenue when an essential employee becomes injured or disabled. There are lots of options out there — and lots of ways to customize coverage to fit specific needs.
Most key person DI policies work the same, with the benefit:
Let’s think about that in practical terms. You have a business owner whose key employee is out on a disability, and they aren’t sure how long the illness will last. After personal concern for the employee, cash flow is most likely the next big consideration. With a key person DI policy in place, it’s a huge relief to know that the business will have cash benefits to spend on hiring a temp or outsourcing certain responsibilities. It means they can stay afloat while still being supportive of the employee. In many cases, it’s the difference between barely surviving and being able to continue to move ahead.
We mentioned that there are many ways to design a policy, and we weren’t kidding. But there are some general guidelines to use when figuring out the right level of coverage. Specifically, you should consider:
Although nothing can replace an employee that’s, well, irreplaceable, key person DI can offer financial protection. In addition to providing funds for a temporary replacement or to offset the cost of recruiting new talent, a key person DI policy can assure clients and partners that the business is financially stable. And it’s a great employee retention strategy.
Don’t limit your discussion of key person coverage to life insurance. The need for DI protection is just as important — and just as achievable.
*This material is for financial professional and educational use only. Not to be reproduced or shown to clients.