2004 Key Person Insurance

2004 What are the 4 things that happen to key people ?....

2004  They die  They become disabled  They quit  They stay with a company until they retire Each creates problems for you, the employer of the key people.

2004 The success or failure of your business depends on key people who are part of management They are the people who.....  Make major business decisions  Produce sales results  control finance  Have production “know-how”  Have creative ideas Every successful business must have one or more of these individuals !

2004 Your business has its future invested in its key people....  Competition is becoming more intense  Production and sales methods are continually changing  Operations are becoming more complex  Constantly rising costs and taxes mean steadily decreasing margins and profit

2004 The death of a key person creates real financial problems....  Cost of finding and attracting a suitable replacement  Loss of time, production, profits...until the new individual becomes “qualified”  Credit may be impaired or lost entirely  An important project or transaction may have to be curtailed or canceled  Competitors become more aggressive while customers feel uncertain  Employees worry about job security Inevitably, the business suffers a serious financial shock. Cash will be urgently needed.

2004 There are 4 methods of supplying cash upon the loss of a key person….

2004 From future earnings or surplus cash But if the loss of a key individual means reduced income, then working capital and credit can be jeopardized by future demands on shrinking profits. 1.

2004 By borrowing But if credit is weakened it may be difficult to borrow adequate funds. ASSETS The need is to increase ASSETS not liabilities. 2.

2004 By building a special reserve fund now But sufficient cash can be accumulated only if death does not come to soon. The fund would be subject to any limitations on accumulated surplus. It is not economical to tie up funds which could be better used as working capital. 3.

2004 By insuring the life of the key person in favor of the company For a cost, usually less than the interest on the money, funds are guaranteed to be available immediately when the need arises. 4.

2004 Cash, Cash, guaranteed when needed through key person life insurance, will absorb part of the financial shock, bolster credit, help attract and train a replacement and reassure customers, suppliers and employees

2004 TAX FREEMortality gain is payable out of the Company’s Capital Dividend Account TAX FREE. CASH.Provides an increasing reserve of readily available CASH. CASHCASH accumulates on a tax deferred basis. Provides excellent collateral. Other Benefits...

2004 Other Benefits Can be used to pay death benefits to deceased’s widow(er). Exempt values can assist in funding of retirement benefits. Instills confidence and loyalty in the key person.

2004 Profits, for the most part, result from managerial skill applied to physical assets. Insuring your key people insures your greatest source of profits. Without this protection, profits may suffer. Today the choice is yours. Which will it be ?

2004 How does it work ? The Business Purchases and retains all ownership rights to a policy on the life of each key person Premiums Proceeds

2004 Let’s determine what the loss of a key employee could mean to your firm