Fischbein Insurance

  • About
  • Comm. Insurance
  • Comm. Property
  • Apt. Owners
  • Newsletter
  • Contact
You are here: Home / Archives for Theme 30

May 22, 2014 By Julian Aston Leave a Comment

Human Capital: How Do You Value It?

BusinessInsurance_KeyManInsurance_CheckList

How do you develop a formula to establish a dollar value on the financial impact of a key employee’s death? As difficult as it may be, you need to come up with a figure as a guide to how much insurance coverage to buy.

Look at the employee’s responsibilities and value how important they are to you annually. If, for example, the employee is responsible for a certain volume of sales, the loss is the profit derived from the person’s sales, less the profit that could be expected from a replacement.

Additional costs might include replacing the employee with the same or similar income, and the costs associated with hiring the replacement: HR expenses, moving costs, possibly a higher salary.

So what are key decision-makers really worth? Unfortunately, there is no tried and true formula that transcends industries and business cycles.

Step 1: Examine each department and define all the required tasks and their value to your organization. This will give you a basis for benchmarking compensation against industry standards.

Figure out which positions have the most impact on overall performance, based on a variety of financial metrics–sales, earnings, return on capital and the like. Be sure to consider how certain positions affect others–poor performance in one area could be the result of problems in another. Then, rank each job in order of importance, based on these factors.

Step 2: Canvass the competition. Try to establish a fact base for the role you’re hiring. Look at industry data. Remember that pay scales for certain roles vary considerably by industry, geography and company size.

According to Salary.com , top executives in the finance, insurance and real estate industries do better on average, while construction and health care execs– UnitedHealth ex-chief William McGuire notwithstanding–go wanting. As for geography, companies in the northeast United States, for example, tend to compensate key executives at higher rates than companies elsewhere in the country. Finally (and not surprisingly) size does matter: Overall, larger companies pay 20% to 70% more for key players across all executive positions than do businesses on the whole.

Salary-benchmarking surveys from major human resources consulting firms like Mercer can cost up to $5,000, but you don’t need to pay that much. Comparison sites PayScale.com and Salary.com sell compensation reports for as little as $20 a pop. The Bureau of Labor Statistics provides salary data by industry for free online. Yet another data option: Look at Securities and Exchange Commission filings by smaller, publicly held companies in your industry.

In Pictures: How To Figure Out What That Key Guy Is Worth

 

 

 

Filed Under: Business, Theme 30

May 22, 2014 By Julian Aston Leave a Comment

What Type of Key Employee Insurance Do You Need?

                                      BusinessInsurance_KeyManInsurance_RedChair

Term insurance is usually used when the only purpose is to compensate for losses caused by the key employee’s death. Policies that accumulate cash value are appropriate in some circumstances. You need to discuss the options with your life insurance agent.

Usually, your organization owns the policy, pays the premium and is the beneficiary. Alternatively, your business and a key employee may agree to split the premium payments, cash surrender and death benefit value.

The employee must agree to the company’s purchase of this insurance. The insurer may also require a resolution from your board of directors stating the policy’s purpose.

Key employee disability income insurance is less well known than key employee life insurance. Nevertheless, the risk of a key employee experiencing partial, total or permanent disability is actually much greater than the risk the person will die. Should a key employee suffer permanent total disability, the loss to your business will be just the same as if the person had died. Key employee disability income insurance protects the business from this loss exposure by paying you anywhere from 40 to 70 percent of the disabled employee’s earned income.

If the disabled person is a partner or sole proprietor, a business overhead expense disability policy provides some protection. This pays, up to the policy limit, office expenses including rent, utilities, salaries and depreciation that continue when a partner or sole proprietor is disabled.

Filed Under: Business, Theme 30

May 22, 2014 By Julian Aston Leave a Comment

Key Employee Insurance

BusinessInsurance_KeyManInsurance_ManLeadingMeetingProtect Your Company From A Catastrophic Loss

Just to clarify, a key employee is someone without whose knowledge and skills would negatively impact your business income and, according to a survey of small businesses by the National Association of Insurance Commissioners, 71 percent of the firms surveyed said they were very dependent on one or two key people for their success. The disturbing fact, however, is that only 22 percent of respondents had key person life insurance in place.

Key Employee Insurance Life or disability income insurance can compensate your business when certain key employees die or become disabled. These coverages cushion some of the adverse financial impact that results from losing a key employee’s participation.

The policy works by paying the business in the event of the death or disability of a person who is so important to the business that their loss could destroy the business. The policy is a cheaper option than standard life or disability policies because the policy can be purchased with a “first to die” provision and cover multiple key employees.

For example:

A company founded by three individuals could take out a key policy on all three of the founders with a “first to die” provision. Upon the death or disability of one of these founders, the policy would pay benefits to the company. The policy would no longer apply to the two remaining founders. The policy payment would be used to replace the efforts of the first founder (hiring personnel, covering loss of sales, etc).

The good news is that insurance purchased in this manner would be much cheaper than three individual life policies and three individual disability policies.

The cost of this coverage can often be defrayed as a business expense on company taxes (see your tax professional). The cost is often cheaper because it is sold as a term product usually for fifteen to twenty years and often corresponding to the most productive work years of the employee or officer. Your company may not need this coverage, but even engaging in the analysis of whether this coverage is necessary is often helpful. Do the analysis and consider what you would if Employee X was not able to work tomorrow.

Filed Under: Business, Theme 30

May 9, 2014 By admin Leave a Comment

Human Capital: How Do You Value It?

BusinessInsurance_KeyManInsurance_CheckListHow do you develop a formula to establish a dollar value on the financial impact of a key employee’s death? As difficult as it may be, you need to come up with a figure as a guide to how much insurance coverage to buy.

Look at the employee’s responsibilities and value how important they are to you annually. If, for example, the employee is responsible for a certain volume of sales, the loss is the profit derived from the person’s sales, less the profit that could be expected from a replacement.

Additional costs might include replacing the employee with the same or similar income, and the costs associated with hiring the replacement: HR expenses, moving costs, possibly a higher salary.

So what are key decision-makers really worth? Unfortunately, there is no tried and true formula that transcends industries and business cycles.

Step 1: Examine each department and define all the required tasks and their value to your organization. This will give you a basis for benchmarking compensation against industry standards.

Figure out which positions have the most impact on overall performance, based on a variety of financial metrics–sales, earnings, return on capital and the like. Be sure to consider how certain positions affect others–poor performance in one area could be the result of problems in another. Then, rank each job in order of importance, based on these factors.

Step 2: Canvass the competition. Try to establish a fact base for the role you’re hiring. Look at industry data. Remember that pay scales for certain roles vary considerably by industry, geography and company size.

According to Salary.com , top executives in the finance, insurance and real estate industries do better on average, while construction and health care execs– UnitedHealth ex-chief William McGuire notwithstanding–go wanting. As for geography, companies in the northeast United States, for example, tend to compensate key executives at higher rates than companies elsewhere in the country. Finally (and not surprisingly) size does matter: Overall, larger companies pay 20% to 70% more for key players across all executive positions than do businesses on the whole.

Salary-benchmarking surveys from major human resources consulting firms like Mercer can cost up to $5,000, but you don’t need to pay that much. Comparison sites PayScale.com and Salary.com sell compensation reports for as little as $20 a pop. The Bureau of Labor Statistics provides salary data by industry for free online. Yet another data option: Look at Securities and Exchange Commission filings by smaller, publicly held companies in your industry.

In Pictures: How To Figure Out What That Key Guy Is Worth

 

 

 

Filed Under: Business, Theme 30

May 9, 2014 By admin Leave a Comment

Key Person Insurance

Workers_AsianBusinessManKey person insurance, also commonly called keyman insurance and key man insurance, is an important form of business insurance. There is no legal definition for “key person insurance”. In general, it can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business. To put it simply, Keyman Insurance is a standard life insurance, TPD insurance or trauma insurance policy that is used for business succession or business protection purposes. The policy’s term does not extend beyond the period of the key person’s usefulness to the business. Keyman Insurance policies are usually owned by the business and the aim is to compensate the business for losses incurred with the loss of a key income generator and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.

Many businesses have a key person who is responsible for the majority of profits, or has a unique and hard to replace skill set such as Intellectual Property that is vital to the organization. An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.

As key person insurance is more of a type of insurance policy than an actual policy, the term is used somewhat loosely and may include other insurance used for other business specific purposes, including:

  1. Buy/Sell Insurance (Shareholder Insurance)
  2. Debt Protection
  3. Revenue Protection

Insurable losses

There are four categories of loss for which key person insurance can provide compensation:

  1. Losses related to the extended period when a key person is unable to work, to provide temporary personnel and, if necessary to finance the recruitment and training of a replacement.
  2. Insurance to protect profits. For example, offsetting lost income from lost sales, losses resulting from the delay or cancellation of any business project that the key person was involved in, loss of opportunity to expand, loss of specialised skills or knowledge.
  3. Insurance to protect shareholders or partnership interests. Typically this is insurance to enable shareholdings or partnership interests to be purchased by existing shareholders or partners.
  4. Insurance for anyone involved in guaranteeing business loans or banking facilities. The value of insurance coverage is arranged to equal the value of the guarantee.

Who can be a key person?

A key person can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skills or knowledge which is especially valuable to the company.

Keyman Insurance Policy Ownership

Keyman Insurance policies can be owned in a number of ways depending on the needs of the business. It is common for a business to own the policy with claim proceeds being paid directly to the business. There is no legislative or insurable requirement for a policy to be owned by a specific party or entity and there may be circumstances be it for taxation or policy continuation purposes where policies may be owned and paid for by the insured person directly, or owned by another individual.

Source: Wikipedia, “Key person insurance” http://en.wikipedia.org website. Accessed November 30, 2015. http://en.wikipedia.org/wiki/Key_person_insurance

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

 

Filed Under: Business, Employee Benefits, Life, Theme 30

May 9, 2014 By admin Leave a Comment

What Type of Key Employee Insurance Do You Need?

BusinessInsurance_KeyManInsurance_RedChair

Term insurance is usually used when the only purpose is to compensate for losses caused by the key employee’s death. Policies that accumulate cash value are appropriate in some circumstances. You need to discuss the options with your life insurance agent.

Usually, your organization owns the policy, pays the premium and is the beneficiary. Alternatively, your business and a key employee may agree to split the premium payments, cash surrender and death benefit value.

The employee must agree to the company’s purchase of this insurance. The insurer may also require a resolution from your board of directors stating the policy’s purpose.

Key employee disability income insurance is less well known than key employee life insurance. Nevertheless, the risk of a key employee experiencing partial, total or permanent disability is actually much greater than the risk the person will die. Should a key employee suffer permanent total disability, the loss to your business will be just the same as if the person had died. Key employee disability income insurance protects the business from this loss exposure by paying you anywhere from 40 to 70 percent of the disabled employee’s earned income.

If the disabled person is a partner or sole proprietor, a business overhead expense disability policy provides some protection. This pays, up to the policy limit, office expenses including rent, utilities, salaries and depreciation that continue when a partner or sole proprietor is disabled.

© Copyright 2014 intouch Business, Inc. All rights reserved. Certain names and articles used with permission of owners. Trade names mentioned herein are owned by third parties.

Filed Under: Business, Theme 30

May 9, 2014 By admin Leave a Comment

Can I Insure The Life Of A Key Employee?

Insurance_MenRedUmbrellaThe loss of a key person can be a major blow to a small business if that person is the key contact for customers and suppliers and the management of the business. Loss of the key person may also make the running of the business less efficient and result in a loss of capital.

Losses caused by the death of a key employee are insurable. Such policies will compensate the business against significant losses that result from that person’s death or disability. The amount and cost of insurance needed for a particular business depends on the situation and the age, health and role of the key employee.

Key employee life insurance pays a death benefit to the company when the key employee dies. The policy is normally owned by the company, which pays the premiums and is the beneficary. Contact an insurance agent or broker whose specializes in key employee insurance for more on how much it may cost for your company.

Source: Insurance Information Institute, “Can I insure the life of a key employee?” http://www.iii.org website. Accessed November 30, 2015. http://www.iii.org/article/can-i-insure-life-key-employee

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Filed Under: Business, Employee Benefits, Life, Theme 30

May 9, 2014 By admin Leave a Comment

Key Employee Insurance

BusinessInsurance_KeyManInsurance_ManLeadingMeeting

Protect Your Company From A Catastrophic Loss

Just to clarify, a key employee is someone without whose knowledge and skills would negatively impact your business income and, according to a survey of small businesses by the National Association of Insurance Commissioners, 71 percent of the firms surveyed said they were very dependent on one or two key people for their success. The disturbing fact, however, is that only 22 percent of respondents had key person life insurance in place.

Key Employee Insurance Life or disability income insurance can compensate your business when certain key employees die or become disabled. These coverages cushion some of the adverse financial impact that results from losing a key employee’s participation.

The policy works by paying the business in the event of the death or disability of a person who is so important to the business that their loss could destroy the business. The policy is a cheaper option than standard life or disability policies because the policy can be purchased with a “first to die” provision and cover multiple key employees.

For example:

A company founded by three individuals could take out a key policy on all three of the founders with a “first to die” provision. Upon the death or disability of one of these founders, the policy would pay benefits to the company. The policy would no longer apply to the two remaining founders. The policy payment would be used to replace the efforts of the first founder (hiring personnel, covering loss of sales, etc).

The good news is that insurance purchased in this manner would be much cheaper than three individual life policies and three individual disability policies.

The cost of this coverage can often be defrayed as a business expense on company taxes (see your tax professional). The cost is often cheaper because it is sold as a term product usually for fifteen to twenty years and often corresponding to the most productive work years of the employee or officer. Your company may not need this coverage, but even engaging in the analysis of whether this coverage is necessary is often helpful. Do the analysis and consider what you would if Employee X was not able to work tomorrow.

 

© Copyright 2014 intouch Business, Inc. All rights reserved. Certain names and articles used with permission of owners. Trade names mentioned herein are owned by third parties.

Filed Under: Business, Theme 30

May 9, 2014 By admin Leave a Comment

Life Insurance For Key Employees

Workers_ManLeadingMeetingWho Is a Key Employee?

A key employee is someone whose knowledge and skills contribute significantly to your business income. Losing a key employee would most likely cause substantial negative financial consequences for your business. According to a survey of small businesses by the National Association of Insurance Commissioners, 71 percent of the firms surveyed said they were very dependent on one or two key people for their success. However, only 22 percent of respondents had key person life insurance in place.

What Is Key Employee Insurance?

Life or disability income insurance can compensate your business when certain key employees die or become disabled. These coverages cushion some of the adverse financial impact that results from losing a key employee’s participation.

How Much Life Insurance Is Advisable?

There is no set formula for putting a dollar value on the financial impact of a key employee’s death. Nevertheless, you need to come up with a figure as a guide to how much insurance coverage to buy. Some life insurance companies provide formulas for this which may or may not have a realistic relationship to the employee’s worth to your business.

In some cases, a look at the employee’s responsibilities can facilitate valuation. If, for example, the employee is responsible for a certain volume of sales, the loss is the profit derived from the person’s sales, less the profit that could be expected from a replacement.

Also to be included is the expected cost of replacing the employee, including employment agency fees and moving expenses and possibly a higher salary for the replacement.

Who Owns the Life Insurance Policy?

Usually, your organization owns the policy, pays the premium and is the beneficiary. Alternatively, your business and a key employee may agree to split the premium payments, cash surrender and death benefit value.

The employee must agree to the company’s purchase of this insurance. The insurer may also require a resolution from your board of directors stating the policy’s purpose.

What Kind of Life Insurance Should I Buy?

Businesses usually use term insurance when the only purpose is to compensate for losses caused by the key employee’s death. Policies that accumulate cash value are appropriate in some circumstances. Discuss which is better for your business with your life insurance agent.

What Is Key Employee Disability Income Insurance?

Key employee disability income insurance is less well known than key employee life insurance. Nevertheless, the risk of a key employee experiencing partial, total or permanent disability is actually much greater than the risk the person will die. Should a key employee suffer permanent total disability, the loss to your business will be just the same as if the person had died. Key employee disability income insurance protects the business from this loss exposure by paying you anywhere from 40 to 70 percent of the disabled employee’s earned income.

If the disabled person is a partner or sole proprietor, a business overhead expense disability policy provides some protection. This pays, up to the policy limit, office expenses including rent, utilities, salaries and depreciation that continue when a partner or sole proprietor is disabled.

Source: Insurance Information Institute, “Life Insurance For Key Employees” http://www.iii.org website. Accessed November 30, 2015. http://www.iii.org/publications/insuring-your-business-small-business-owners-guide-to-insurance/specific-coverages/life-insurance-for-key-employees

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Filed Under: Business, Employee Benefits, Life, Theme 30

May 9, 2014 By Julian Aston Leave a Comment

IN-Life Insurance For Key Employees

Dear Valued Customer,

In this issue of the “—————–” we focus on Key Employee Insurance.

Consider how your business might fare without you, a top manager, or your most successful salesperson – the one who brings in most of the revenue. However morbid a subject life insurance may seem, it could literally save you or your family against lost income, in the event of the untimely death of a key employee.

If your business could be significantly impacted by the loss of a key person, stopping your business operating entirely, or simply making the running of the business less efficient and result in a loss of capital, read on to find out why and how you should purchase Key Employee Insurance.

We appreciate your continued business and look forward to serving you.

Kind regards,

Filed Under: Business, Employee Benefits, Life, Theme 30

[footer_backtotop]

Copyright © 2023 Fischbein Insurance Services · All Rights Reserved · SITE DESIGN BY INTOUCH ·