By Dan Schulte, Vice President and Manager, Annuities and Insurance
All businesses, regardless of their size, have key employees who are invaluable to the success of the company. In a small business, each employee usually has a more direct effect on a company’s profitability because there are fewer employees interacting with customers, creating products and performing services. As a result, the loss of a key employee due to death or disability can be especially difficult for small businesses to operate until a replacement employee is found.
Replacing a key person takes time and money, and could cost the business valuable clients during the transition. Key person life insurance is a way to help small business cover the financial losses that would occur should a key employee die. With this type of planning, the business is the beneficiary of the plan and pays the insurance policy premiums. Providing this protection can help assure stability of the business for employees, customers and creditors, if that key employee should happen to pass away.
Business Overhead Expense (BOE) disability insurance is designed to protect small and medium size businesses from the loss of a key employee or business owner due to a disability or illness. Typically these types of policies will reimburse a business for actual expenses that occur during a period of disability. Regular expenses that could be covered under a BOE policy include replacement salary expense, employee salaries, rent, utility bills and property insurance premiums to name a few.
One thing to keep in mind is that key person life insurance and business overhead expense disability insurance are designed specifically to protect a business due to death or disability. These policies are not a substitute for personal life and disability insurance that are designed to protect an individual’s family from these unfortunate events. Contact your Benjamin F. Edwards financial advisor for a discussion of all your individual and business life and disability insurance needs.