Key Employee Insurance
The untimely death of a key employee or business owner who is also a key employee can have a disastrous effect on a business.
Some of the costs of such an event might include:
- A weakening of the company's credit rating.
- The financial cost (in time and dollars) to find, hire and train a replacement.
- The distraction of other employees, resulting in deadlines not met, deteriorating morale, or a higher level of personality conflicts.
- A need for cash to fulfill promises made to the deceased employee's spouse or family, such as salary continuation or deferred
compensation.
- The inability to seize a business opportunity because cash reserves are being used to recruit and train the new employee.
- A loss of confidence among both suppliers and customers.
Additional problems (if key employee is an owner) might include:
- Disagreement between heirs and surviving business owners or key employees.
- Lack of cash to buy the interest of the deceased owner, requiring a sale of the business to an unknown "outside third party."
- Surviving owners may be forced to work with someone who is either not competent, or not motivated enough to make the
business thrive.
- The business may have to be sold to pay estate taxes.
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