All businesses, regardless of their size, have key employees whose contributions have a significant impact on the bottom line.
A key employee is anyone who makes a significant contribution to your company's financial success--a company president, talented sales director, a product designer, a partner who makes key management decisions, or an executive who is a TV advertising personality. And, unlike a machine, key employees are not so easily replaced.
Businesses that depend on a particular piece of equipment typically insure it. The loss of a key employee can have a serious financial impact. In addition to the human tragedy, the loss of a key person often means the loss of important customers, skill sets or business relationships.
Securing Protection Through Insurance
Key person life and disability insurance can help a business protect itself against the financial risk associated with losing a key employee.
Key Person Life Insurance
Life insurance purchased on the life of a key person will pay the business, upon that employee's death, the proceeds of the policy. That benefit can be used to cover financial expenses and train the key person's replacement.
Key person life insurance can also provide a cash value benefit depending on the type of policy purchased. This cash value can be used for a few strategic business reasons while the employee is still living.
Key-Person Disability Insurance
When a key employee is disabled the loss is experienced in two ways. The first is the loss of profits that would have been attributed to the key employee. The second is the cost associated with finding a replacement. Key-Person Disability coverage is designed to provide your business with income during the disability of a key employee. Planning for key employees can help small business owners offer attractive incentives to retain key employees, while planning for a potential business loss.
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*Guardian does not issue nor service health insurance.
**Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 1/2 any taxable withdrawal is also subject to a 10% tax penalty. Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.
Vital Signs Insurance
17 Talcott Notch Road, Farmington, Connecticut 06032, United States
*Guardian does not issue nor service health insurance.
Jonathan Lipson is a Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY.
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
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