At the end of the day, an even better question would be: “how much do you WANT?” Or more clearly stated: “What do you want it to accomplish for you?” The good news is, we will help you determine what we call your “Economic Life Value (EVL)”. This way, the amount of life insurance protection you are purchasing is tied clearly to personal financial goals and needs, so there is no wasted money on coverage you don’t need, and reduced risk of falling short in the vital protection your family or business needs. Here’s some good items to factor into the equation:
Debt to be paid off – and current timeline expectations
Age of your children – time left expected to be raising them in your household
College funding, if desired
When you get price quotes, online or from an agent, all you’re getting is a product quote merely based on pricing alone. You may end up comparing products that are very different in the features and benefits they offer. You have no idea how the various products on the market compare, and what might be best for you. You are not guided as to the various riders that can be added, as well as the different ways a policy can be designed depending on length of time, protection and growth goals, and ongoing changes, etc. When you just go price shopping and get quotes, your getting a financial band-aid. At Vantage Insurance Solutions, you’re getting a real long-term wealth planning solution that you can live with and sleep well at night knowing it was truly designed to meet all your goals and needs. With us, you’re getting all the guidance and help you need to make a well-informed decision on what’s best for you. We will make it simple and easy to put together the right plan, with the right product, and walk you by the hand through the process of putting it in force so you don’t have to worry about a thing! Let’s talk and get you headed on the path to financial security today!
“The best answer to that challenging question is: ‘It depends.’ You see, the various products on the market have different possible uses, pricing structures, pros, and cons. We have found that the best way to find the answer to this question is to have a conversation about your needs, goals, and current financial situation. Once we have a good idea of these things, we can apply the tried and true principles of the priorities of wealth creation and protection to your situation, and the answer becomes very simple and clear.”
Key person life insurance is designed to protect a business against potential financial loss caused by the death of an employee who is critical to the success and profitability of the business. The business is the owner and beneficiary of the policy.
One method for determining the amount of insurance is the “contribution to earnings” method. Under this method, the business estimates the key person’s contribution to yearly profits and multiplies it by the estimated number of years the employee would have worked. The result can be appropriately discounted to establish a basis for how much life insurance to purchase currently.
Another method is the “cost to replace experience” method. Here, the business takes the key person’s compensation, subtracts the amount of salary attributable to routine duties, and then multiplies that number by the years required to bring a replacement up to the key employee’s level of experience. Add to this the expenses associated with recruiting and hiring a new employee to determine the appropriate amount of key employee insurance.
Another is the disruption of business when clients withhold or delay business dealings until the impact of the employee’s death becomes known. Credit difficulties can arise, since creditors often remain cautious until they can assess how the key person’s death will affect the business. Finally, increased expenses inevitably accompany the hiring and training of a key employee’s replacement.
If the key person doesn’t die while employed, the business can use the cash value of the policy to meet other needs.
The policy demonstrates financial stability to creditors, or the cash value can be used as collateral for a loan.
For key employees who are owners, the policy could help fund a buy-out of the deceased person’s business interest.
If the policy isn’t needed to protect the business, the cash value can be used to provide deferred compensation or retirement income for the key employee.
Key person life insurance can serve a number of uses benefiting a business, both during the key employee’s life and after a key employee’s death.
A key employee is anyone who contributes signifi cantly to the fi nancial success of the business. A key employee (who may or may not be an owner) is anyone who is responsible for management decisions, is highly paid, has a significant impact on sales, or has a special rapport with customers or creditors.