While it is routine for corporations to insure their physical assets, most forget to insure their key human resources. Many businesses may not be aware that their key income producing staff can be insured! Insuring key persons should be part of any prudent succession planning strategy since the chance of this asset being unable to work due to critical illness or injury is significant.
Key person insurance can provide a lump sum payment to your business should your key income producing staff – such as salesmen, CEO’s or managing director’s – be unable to work due to critical illness or injury. Such illness or injury could be a heart attack, stroke or cancer, conditions which may require several months if not years to fully recover from before they can return to work. How would your business cope during that time without key person insurance?
Aside from the significant loss of revenue, there are other risks involved when key person insurance is not in place for your business. Expenses incurred will necessarily include:
The recruitment and hiring of a new employee. The manpower involved in finding someone who is as skilled and knowledgeable as the former key person can be a costly and time consuming exercise.
The costs of training replacement human resources. While the new employee may have the skills and experience needed for the job, but they would still need time and training to familiarise themselves with the company, its systems and clients.
The cost of a signing bonus. A signing bonus is often given to the prospective employee to attract him to signing a contract. While optional, it shows them just how valuable they would be to the company.
The cost of transferring the new hire. In some cases, the new key employee is not from within the area where the business is located. Companies may add the transfer/moving costs as part of the package to entice them to move.
Coverage of any bond or liability the new hire may have with their previous company that will impair their transfer to your business, particularly if the new hire is under a contract to stay with their previous company for a certain period of time.
The cost that is associated with providing income or assistance to the employee if he becomes disabled or to the surviving family if he dies.
Key person insurance provides a business with funds that can help them manage any financial risks that can come from unforeseen circumstances resulting from the loss of an important employee.
Our specialty is key person and business partnership insurances. In order to insure your business for the right amount of cover, we will make a detailed insurance needs analysis and source the best product available on the market from Australia’s leading life insurance companies at the most competitive price. All products we recommend have up to date definitions for conditions and we review these products personally before we recommend them to a client.
Due to our personal and holistic approach, we are able to identify key persons as well as any discrepancies in existing policies. With over 15 years of experience, Katriel Warlow-Shill and the team at Verdure Financial Planning Solutions are the thought leaders and engineers of appropriate key-person insurance cover which enables your business to recover before it has even stumbled.
Interested how key person insurance can work for your business? Call our friendly office today to discuss.
Please do not hesitate to contact our friendly office staff if you have any questions that we may assist you with. If any of your personal circumstances have changed, such as a change in income or growth in your family, then please let us know to ensure your details are up to date and your insurances adequately cover your needs.
Katriel Warlow-Shill and SMSF Insurance Specialists Pty Ltd atf SMSF Insurance Specialists Trust t/as Verdure Financial Planning Services are Authorized Representatives of Synchron Australian Financial Services Licensee No. 243313