Posted as written by Richard Weizeorick (May 2012) - MTL Financial Group
Life Success and Legacy can help your business plan for key person life insurance via the use of Infinite Banking Concepts (IBC) as taught by Nelson Nash in Becoming Your Own Banker.
How does a business protect its assets?
Normally when you ask this question, most people think about the building,
office equipment, supplies and salable material, so the answer is by
purchasing fire and casualty insurance. But what if the assets are the people
who keep the business running on a day-to day-basis? These are the people
whom the business relies on to make the management decisions, handle the
finances or have that special rapport with customers and creditors - a key person.
Definition
A key person is usually a highly paid employee or owner who is responsible
for management decisions, has a significant impact on sales, and has a
special rapport with customers and creditors. If the key employee should die
suddenly, the business would suffer a loss of the person's management skills
and experiences, and loss of sales and missed business opportunities. In some
cases, his or her death could even cause credit difficulties, including
missed payments, deposits or a creditor's reluctance to extend credit.
How it Works
Key person life insurance is a life insurance policy purchased and owned by
the business, on the life of the key employee. Upon the death of the key
employee, the insurance company pays out the proceeds to the business,
providing an immediate source of funds to the business. While there are many
advantages for a business to own key person life insurance, one disadvantage
is that because the business is both the owner and the beneficiary of the
policy, the premiums are not tax deductible.
Key person life insurance is not a specific type of policy, but a way to use
life insurance to offset a business risk. By using a permanent, participating
life insurance policy, set up in the IBC way, the policy not only pays a
guaranteed death benefit, but it can also be a valuable asset to the
company’s balance sheet because of the policy's cash value.
More than a Death Benefit
Key person life insurance can even benefit a business if the insured doesn't
die while employed by the company. Some added benefits are that the company
can access the policy's cash value for other purposes, the cash value can be
used to demonstrate financial stability to creditors, or it can be used as
collateral for a loan. If the key employees are also the owners of the
business, the policy can help fund a buyout of their interest in the business
at their retirement. In addition, if the policy isn't needed to protect the
business, it can be used to provide deferred compensation funds to the key
employee. The bottom line is that key person life insurance can serve a
number of uses and benefit a business both during the key employee's life, as
well as after his or her death.
Key person life insurance is a simple
concept: it's life insurance that insures the life of a person key to the
success of the business against unexpected death. It pays the business the
death benefit so that it may cover the additional expenses associated with
hiring and training a replacement for that employee.
For a complimentary analysis of what this could mean for your business contact me at mzimmeribc@gmail.com.
Posted as written by Richard Weizeorick (May 2012) - MTL Financial Group
Life Success and Legacy can help your business plan for key person life insurance via the use of Infinite Banking Concepts (IBC) as taught by Nelson Nash in Becoming Your Own Banker.
How does a business protect its assets?
Normally when you ask this question, most people think about the building,
office equipment, supplies and salable material, so the answer is by
purchasing fire and casualty insurance. But what if the assets are the people
who keep the business running on a day-to day-basis? These are the people
whom the business relies on to make the management decisions, handle the
finances or have that special rapport with customers and creditors - a key person.
Definition
A key person is usually a highly paid employee or owner who is responsible for management decisions, has a significant impact on sales, and has a special rapport with customers and creditors. If the key employee should die suddenly, the business would suffer a loss of the person's management skills and experiences, and loss of sales and missed business opportunities. In some cases, his or her death could even cause credit difficulties, including missed payments, deposits or a creditor's reluctance to extend credit.
How it Works
Key person life insurance is a life insurance policy purchased and owned by the business, on the life of the key employee. Upon the death of the key employee, the insurance company pays out the proceeds to the business, providing an immediate source of funds to the business. While there are many advantages for a business to own key person life insurance, one disadvantage is that because the business is both the owner and the beneficiary of the policy, the premiums are not tax deductible.
Key person life insurance is not a specific type of policy, but a way to use life insurance to offset a business risk. By using a permanent, participating life insurance policy, set up in the IBC way, the policy not only pays a guaranteed death benefit, but it can also be a valuable asset to the company’s balance sheet because of the policy's cash value.
More than a Death Benefit
Key person life insurance can even benefit a business if the insured doesn't die while employed by the company. Some added benefits are that the company can access the policy's cash value for other purposes, the cash value can be used to demonstrate financial stability to creditors, or it can be used as collateral for a loan. If the key employees are also the owners of the business, the policy can help fund a buyout of their interest in the business at their retirement. In addition, if the policy isn't needed to protect the business, it can be used to provide deferred compensation funds to the key employee. The bottom line is that key person life insurance can serve a number of uses and benefit a business both during the key employee's life, as well as after his or her death.
Key person life insurance is a simple
concept: it's life insurance that insures the life of a person key to the
success of the business against unexpected death. It pays the business the
death benefit so that it may cover the additional expenses associated with
hiring and training a replacement for that employee.
For a complimentary analysis of what this could mean for your business contact me at mzimmeribc@gmail.com.
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