While key person insurance is usually the absolute best solution to cover the risk of losing a top employee to death or disability, there are a few alternative options available. Regardless of the circumstances with your company, it is wise to consider all alternatives Following is a list of alternatives to purchasing key employee insurance.
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Business Owners Use Personal Funds.
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Use the Cash Flow of the Company.
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Have the Company Borrow the Funds.
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Why Not Just Buy Key Employee Insurance?
If you own a business, ask yourself, if my best sales person were killed in a car crash, how much would it cost to replace him/her? With this option, you and your business partners would have to come out of your own pockets to generate enough cash to keep things going. This may or may not be an option as most business owners have the majority of their assets tied up in the business and have very little liquidity.
In essence, this option is self-insurance. The reality is that losing a key employee will likely have a devastating effect on revenue and cash flow. If cash flow decreases, how are you going to fund the replacement of a key person?
How is your businesses’ credit? If you have excellent credit, the company may be able to borrow the funds. Taking out a loan does provide some flexibility in that the company can stretch out payments over time thereby reducing the immediate financial impact of the loss of the key employee. However, how is the bank going to see your company’s future without your most productive employee?
Without question, the most affordable option to protect your business from the untimely death or disability of a top employee is to purchase key person life and/or disability insurance. With key employee insurance in place, if the “unexpected” happens, funds are available immediately (in most cases) to cover the costs of recruiting, hiring and training a capable replacement. Cash would also be available to meet shortfalls associated with lost revenue. Why not investigate a key employee insurance policy? Call MEG Financial today at (877) 583-3955 or click here for an instant key employee life insurance quote.