Gregory S. DuPont
Managing Your Risk with Key Employee Life Insurance
Just as many of us may tend to avoid contemplating the loss of those we depend on everyday, business owners may often be unprepared for the death of key employees. Yet, consider for a moment how such a sudden and unexpected event could affect your business. Suppose you lost your most productive sales manager tomorrow. What would you do to replace the revenue stream and customer contacts he or she generated? How long would it take to recruit a replacement and bring that person up to speed? Would the loss affect company morale? Would other employees become concerned and begin seeking new jobs?
Benefits Before and After
Consider how the death benefit proceeds could benefit your company if you suddenly lost a key employee. You could offset lost revenues or profits, pay outstanding bills, or recruit and train a replacement. If lenders became concerned about the impact of the employee’s death, funds would be available to repay business loans. In addition, key employee life insurance can also benefit your business before disaster strikes. For instance, it may facilitate the approval of loans by assuring lenders they will be repaid.
Making the Decision
In deciding whether to purchase key employee life insurance, you need to weigh the premium cost against the risk of operating without insurance protection. If you buy this type of insurance, and the employee lives until retirement, it will have cost you a relatively small sum, however, if you do not have coverage and a key employee dies, it could cost you your business. Therefore, the first and only question you may want to ask yourself when weighing the pros and cons is, “Can I afford to pass up key employee life insurance and potentially put my business at risk?”