Key person insurance is designed to insure the lives of your key executives. It helps you protect yourself, the company, and its creditors against the financial impact (loss) should one of your key executives suffer a disabling illness, injury, or premature death.
Effective leadership recognizes and values talent. As you think about your leadership team, have you considered what would happen if you unexpectedly lost a member of your team?
Your leadership team reflects what you consider mission-critical talent for your business and how it best serves your customers. Your team members also highlight what is necessary for you to do what you do best.
Would the unexpected loss of any team member cause an economic challenges for our business, like:
Leadership economics would come into play if you answered "yes" to any of these questions. Leadership economics is about minimizing risk, maximizing certainty, and mitigating hardship. Insure against the economic loss your business would suffer in the event a member of your team experiences a disabling injury, illness, or even premature death.
The amount of life and disability insurance coverage a business may need for a given executive depends on various financial underwriting factors.
Generally speaking, a key person's life insurance value derives from a multiple of their executive salary. The multiple typically runs from 2 to 6 times the executive's regular compensation.
Other factors to consider include:
Your CPA or financial advisor may also be an excellent resource for estimating the appropriate value of a key executive.
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