The loss of a key person employee could be incredibly detrimental to the future success of a company. While a majority of businesses offer Key Person Life Insurance should their superstar employee prematurely pass, what would they do if their key employee suffers an Injury or sickness that keeps them out of work for a lengthy period of time?
Employees are 8 times more likely to suffer a disabling sickness or injury before they retire, than they are to pass away.
Key Person Coverage provides the crucial benefits and cash flow a company needs to move forward, while maintaining profitability if a key person were to incur an injury or illness.
After 90 days, benefits for Key Person Insurance will typically pay 150% of the employee’s salary over 12 months – providing enough time to recruit, hire, and train a replacement without losing any profits. In some cases, benefits in excess of 150%, unrelated to income, may be obtained.
Companies are able to use these benefits to hire a temporary employee if the prognosis is short-term – or to defray the costs related to finding a replacement if the disability is permanent.
A lump sum benefit could provide a capital infusion to a firm with a single cash payment. This approach is typically used when a firm has significant cash flow, or savings for a temporary disability. However, a long period of disability may cause a major financial pinch, creating the need for a lump sum benefit.
With an elimination periods of twelve months, benefit amounts may be up to three times the annual income of the key person. Larger benefits are also available, subject to financial justification.
Additional information can be provided to demonstrate the value and likely loss a firm will suffer in a key person’s absence. Contact your DI Sales Rep to discuss a case.
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