Submitted –
For Immediate Release
December 7, 2015
Business owners often overlook protecting their most valuable asset
ABBOTSFORD, B.C. — As a business owner, have you considered what could happen to your business if something tragic happened to an indispensable employee?
Take the example of Sandra, the owner of a small marketing firm. Sandra has worked tirelessly to build her business and has two employees, an executive assistant and a sales manager. Unfortunately disaster strikes and Sandra’s sales manager is killed in an accident.
“Unfortunately, if Sandra isn’t prepared, there’s a good chance her company will suffer significant financial losses as a result of the void left by the key employee,” says Eddy Kapenda, a life insurance specialist at Envision Financial, a division of First West Credit Union. “The good news is, business owners can avoid losing what they’ve worked so hard for by having insurance solutions in place before disaster strikes.”
Key person insurance is a life insurance policy placed on a “key” employee of the business, someone deemed crucial to the running of the operation, such as a plant manager or director of sales.
“This insurance provides needed funds in the event of sudden death or incapacitation and gives the business time to react to the essential employee’s absence,” says Kapenda.
These funds can be used to pay off debts, provide cashflow during a period of sales decline or finance the cost of hiring and training a replacement.
The policy insurance amount will depend on how much money the business would need to survive until it could replace the key person and get the business back on track. In addition, lifestyle factors such as age, gender, pre-existing health conditions and smoker status are also considered.
“The type of insurance required also influences cost,” says Kapenda.
Generally speaking, there are two types of life insurance in Canada: term and permanent. Term insurance is for a specific time period and permanent is exactly that—coverage for life. The premiums on term life insurance are more cost effective because the term might run out before the insurance company has to pay the policy out.
“If the plan is to maintain the coverage until the key person retires or exits the business, then term life insurance is adequate. If the plan is to offer the insurance to the key person when they exit the business—perhaps as part of the benefit package—then permanent life insurance could be an option to consider,” says Kapenda.
Media Contact
Jason Brown
Manager, Public Relations & Communications
First West Credit Union
604.539.7415
jbrown@firstwestcu.ca