When speaking with small business owners about their life insurance options, it’s important to emphasize the many ways policies can protect a business from the temporary or permanent loss of the owner or another critical employee. While it can be uncomfortable to discuss these issues with clients, it can also be viewed as an opportunity to learn about and address consumer fears and concerns.
This can be a valuable relationship-building tool that also provides the client with peace of mind regarding the future of their business. Advisors need to hone in on a suite of products that provide protection from a range of potential problems that could derail a business and diminish its ability to compete in the marketplace.
Identifying key people and protecting businesses from their loss
Many businesses large and small are extremely reliant on a single worker, and whether this individual is the owner or a particularly gifted employee, their loss or disability could severely impact a business’ ability to carry on without substantial rebuilding.
The owner of a business undoubtedly knows this employee’s value, but many owners are unsure how to protect their business from the person’s loss. To address these issues head on, advisors can illuminate the potential problems that arise when a crucial employee is lost to disability or illness. Advisors should also note the relatively high probability that an illness or disability will strike some percentage of a business’ workers over the years.
A risk with serious consequences
Long-term or permanent disability seems rare, but it is actually a common problem that affects even healthy workers. According to the Council for Disability Awareness, more than 20 percent of males and females over the age of 35 in otherwise good health will become disabled for three months or more during their working careers.
The reality is, more than one-fifth of the overall labor force will end up out of work for at least three months during their lifetimes, and businesses will suffer as a result of that loss. The prolonged absence of an important employee can make it difficult for a business to hit its goals, and the costs associated with replacing that individual, on either a permanent or temporary basis, can quickly eat into a company’s bottom line and impact an organization’s solvency.
By presenting these potential issues and highlighting the ways insurance can offer a respite from employee disability and death issues, advisors can work with business owners to protect their organizations from employee loss.
Options that offer protection
Advisors will want to educate their clients on key person disability insurance options. These offer different types of protection, and both can be invaluable for the business owner who wants to protect their company from the threats posed by a loss of critical employees.
Advisors can appeal to a business owner’s concerns about the business ramifications caused by the loss of a crucial employee to disability and the natural worry surrounding a person’s own disability in the face of mounting business and family demands.
This conversation could become emotional, so it’s important to keep things factual and focused on the evidence. The critical thing to communicate is the range of ailments that can cause a disability, which may encompass more than the business owner initially thinks. Obviously, physical impairments result in disability, but the Social Security Administration noted that mental issues and the physical difficulty caused by activities such as cancer treatments can also result in lost work and problems for the business and its owner.
The importance of key person insurance
A discussion of the need for disability insurance should include information about key person and its value to a business of any size. With a key person insurance policy, a business receives financial support in the wake of a critical employee’s permanent disability or death.
When speaking with consumers about key person insurance, advisors should emphasize that these policies can remove potential stress from a business owner who has to cope with the loss of an important employee. The funds provided by key person policies allow consumers to finance the search for new workers, enable payments to family members of the deceased or disabled who receive the employee’s company equity, and generally make a painful situations less problematic.
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