Here’s a consideration for business owners of all sizes: If something happened to your business partner or a key employee, would your business function as it does now?
As a small business owner, you may employ at least one individual who is essential to your success. This person may be a partner or have a unique expertise that is difficult to replace. If this person’s exit from the business is planned, you can prepare for their loss and take the necessary steps to minimize the impact of their departure. However, if their departure is unplanned, then your business may be exposed to considerable financial risks.
If losing one or more employees would have the following consequences, key person life insurance could be right for you:
- A reduction in your earning capabilities
- The loss of a specialized skill
- A disruption in everyday business operations
To minimize your risks in the event that one of your key employees dies, becomes disabled or leaves the business prematurely, key person life insurance can protect your business. Here’s how it works:
- You purchase life insurance on the key individual(s).
- You are the beneficiary of the life insurance policy, and the policy pays out to you.
- Tax-free funds from the policy can be put towards finding, hiring and training a replacement for this person.
- These funds can also be used as compensation for lost business revenue during the transition and help to finance timely business transactions.
- The policy can be transferred to a departing key employee as a retirement benefit, or to a different key individual upon the retirement of the original key employee.
- The policy can be used to buy out the key employee’s shares or interest in the business. Premiums for the policy are based on several factors, including the key employee’s age, physical condition and medical history.
- The amount of coverage also affects the insurance rate.
Our commercial and life insurance professionals at EasyInsure will work with you to help determine your key person life insurance needs and available options. Please reach out to us for more information 1-800-679-2640 or email us
info@easyinsure.ca