Funding a Key Man succession plan with Life Insurance.
Businesses should consider the financial consequences if any one of its pivotal employees should suffer a premature death.
One consequence is that the company will lose time and money replacing that individual. Additionally, important clients, political alliances, and irreplaceable innovation and knowledge may also be lost with that person’s death. You should therefore consider setting up a key man succession plan, to ensure the smooth transition of your business interest in a case such as this.
Recognizing who these employees are and calculating the financial impact is one thing, putting cash reserves aside to pay for this expense is another thing. Therefore you must also investigate funding methods. One of the first methods to consider is life insurance. The life insurance that funds the key man policy will create a sum of money at death that will be used absorb the cost of losing a key employee.
