You run a business or a professional practice. It is successful. You have a group of employees, along with yourself, who are key to business success. It is a great team. Margins are okay, but not great, and you or one of your key people becomes disabled and won’t return to work for a significant period of time – or ever.
They – whoever “they” are – say that no one is irreplaceable. That’s probably true (except for you and me, of course), but over what period of time? Key questions:
- How long can you afford the loss of revenue or increased expense resulting from disabilities that extend beyond a few weeks?
- How can you afford the expense of temporary employees while supporting a long-term loyal key employee? Can you even find one who will keep productivity and profitability at the same level?
- What can you do to reduce the risk of this expense occurring?
Try this – transfer the risk of amounts beyond what you can afford to a commercial reinsurer – otherwise known as an insurance company. You can insure expenses associated with the disability of a key person, including yourself.
Insurable expenses include salary expense, including income for you, as well as overhead ranging from benefits to rent and mortgages to office expense such as telephone and energy among others. Salaries for replacement workers (even you) can be insured as well. Each situation is different with a program being tailored for each organization.
From the simple – covering $20,000 in replacement expenses while the shop foreman is out of work, to the “wow”, covering the loss when the head business developer of a hedge fund is out of work for two years, causing a $3 million hole in revenue, our programs are tailored to each situation.
Program design would look at how long you can go without replacing the person or the lost income/increased related expense and how long you would need the insurance covered income before things are humming.