In the next blog, I will discuss the “Split Dollar” Concept which can be very interesting for successful corporations. Today, however, let’s begin with the core issue. If one of the owners of a company (or one of the key employees) suffers a stroke, a heart attack, or is diagnosed with cancer, would this impact the company in any way? Just imagine if the person most responsible for developing new clients, or the key IT person, or any key employee the company depends on for that matter were to suffer a major illness! The impact would be twofold: both on the individual and on the company. Throughout these blogs, we have explored the issues involved at the individual level, so I am going to concentrate on the effects involved at the corporate level.
One comment I MUST make is the following: if an owner states that HIS/HER illness will have little or no effect on the company that is almost a GUARANTEE that there is an employee (maybe even more than one) on whom the company depends. THAT person should be protected because his/her illness could mean disaster.
Remember that a severe illness almost never happens at the best possible time. In fact, they tend to happen at the worst possible time. I remember a company who had signed an agreement with Quebec
It can be very difficult to retain valuable employees. It is certainly expensive to replace them; there are initial recruiting and training costs involved and then a period of adjustment until they feel comfortable enough in their new tasks to fully take over where their former colleague left off. Have you ever overheard employees discussing how one of their colleagues or a family member has been diagnosed with cancer? It is not a pleasant conversation. Imagine now how the impact would be lessened and how their opinion of and loyalty to their employer would be affected if they knew that a check for $50,000 or $25,000 or $10,000 (tax free) would be forthcoming because of a plan you, as the employer, established? This is a low (and tax deductible) cost with HUGE benefits to both the employer and the employee. Imagine the stress that would be relieved. Money does NOT make people well, but it sure does allow you to concentrate on getting well instead of on how the bills will be paid.
Click these for more information on the respective topics :
Long Term Care Insurance
Disability Insurance
Critical Illness Insurance
Life Insurance
Mortgage Insurance
Click these for more information on the respective topics :
Long Term Care Insurance
Disability Insurance
Critical Illness Insurance
Life Insurance
Mortgage Insurance
Hi Tim,
ReplyDeleteThis is certainly a very important topic which is all too often neglected by business owners. The loss of a key employee can really hurt a business, cause major slowdowns and sometimes even threaten the business's survival like in your example.
I wanted to add a point: when a business owner is addressing this important need, it would be wise for them to also provide a sum for the employee so they receive funds to allow them to concentrate more on their medical situation instead of worrying about money.
This would help fulfill their moral obligation as an employer as it would provide the funds to allow them to take care of their key people in time of need. It also makes good business sense as they are in fact protecting their most important "assets". It would demonstrate they really care which in turn would likely increase the employee's loyalty to the firm.
How best to determine the amount? One approach would be to consider matching the same amount they have determined appropriate to protect the firm. Another would be to provide a multiple of salary, for example 2 yrs. They should at least offer a minimal flat amount but it would not be recommended to offer nothing at all. This could actually work very negatively as the employee might feel the employer only cares about the company. Remember that the employee will quite likely have to be on board to go through the underwriting process so it has to make sense for them as well.
This approach will go a long way on various levels. Could you imagine how well regarded the advisor would be if ever there was a claim? The owner would be happy as the business would have been well protected and they would feel good about taking care of their employee. The employee would feel good about the employer for having provided for them in a crucial time. Hard to find a better example of how valuable this advice could be...isn't it?
That is why I wrote the last paragraph in my most recent blog. Just imagine the lunchroom conversation when that check is delivered to the employee. Imagine if it were to help a child or parent of that employee - or a spouse. The employer just MIGHT get some "love".
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