If you have a successful business that is at risk of losing everything due to the loss of one or more people who play an important part in the thriving of your business, it is important to protect the lives of these people efficiently and carefully. Prudential offers a smart approach where life insurance is optimized for implementing funds to compensate a business for a loss of a key employee. Some of the next points will further help you know if the insurance plan is for you. One of them is that you may recognize yourself as a business owner with a key employee that assists the company to be successful with their unusual managerial talents and practices. This employee has developed strong rapport with clients that achieves a high percentage of the company’s profits. He or she owns skill sets that is not easily replaceable. Your business would experience a climb in expenses and a loss of revenue consequent to the demise of the key employee from disengaged client bonds, lost skills, unsteady company’s credit rating and a decrease in resources from rehiring, recruiting and training costs.
How can this work?
The business notifies the key employee the plan of insurance purchase on their life and consent is accepted from employee. A life insurance policy on the key person is bought by the business owner. The business becomes the owner, is responsible for the premium payments and beneficiary of the policy. The premiums are not considered tax deductible items. As long as the employee lives, there is a cash value policy that serves the business as capital that is available through loans or withdrawals.
The business has a choice to keep or abandon the policy upon retirement or completion of key employee’s employment or have the policy transferred to the insured-employee. The business is paid a death benefit by the policy when the employee dies. The proceeds can help the business cover expenses for recruiting, hiring, and training the employee(s) next in line. It can also assist in the business to meet other financial necessities and commitments. There are several if not many advantages to having a key person insurance for the business. A key person insurance in working helps increase credit rating of a company when suppliers and creditors have confidence in the company to overcome it’s burdens if and when a key person is lost. It can also influence a feeling of security and trust for other employees in the company to move forward and progress afterwards. The key insurance also has other secondary benefits which includes helping to fund the continuance of the key person’s salary to the spouses or other beneficiaries using the proceeds. Delayed compensation settlements can be financed unofficially using the coverage when cash value life insurance is used. Stocks belonging to departed owner can be reclaimed using the proceeds as well. With all these benefits in mind, it is well implied that Prudential’s Key Insurance is a strong consideration in strengthening the welfare of the business, employer and employees together.