How Can a Sole Owner Assist a Key Employee…
Authored by Gary Peterson A key employee who plans to purchase the business at a sole owner’s death guarantees personal job security without the risks associated with launching a new business venture. If, however, payment of the life insurance premiums required to fund an insured buy-sell plan imposes a financial hardship on the key employee, it may be to the owner’s advantage to help the key employee with the premium payments. In this way, the owner assures his or her family of receiving the full value of the business at the owner’s death. There are three ways a sole owner can assist a key employee with the premiums required to fund an insured buy-sell plan: Salary Increase The owner could increase the key employee’s compensation to cover at least a portion of the insurance premiums. Personal Loan The owner could make a personal loan to the key employee for at least a portion of the insurance premium. A schedule for the repayment of these loans could then be included in the buy-sell agreement. Split-Dollar Plan The owner could loan the key employee all or part of the insurance premium with the loans secured by a collateral assignment of the insurance policy. Unless, the key employee pays the employer market-rate interest on the loans, however, the key employee is taxed each year on the difference between market- rate interest and the actual interest paid, if any.Educate the Public About the Value of Life Insurance
If your clients and prospects were better informed about life insurance, do you think your job of selling would be easier?
I read an interesting article recently about the cost of insurance. The article describes a survey that asked consumers to estimate the cost of a 20 year, $250,000 level-term life insurance policy for a healthy 30-year old. Their answer was about $400 annually. The actual cost is half of that – around $190 annually.
Our job is, in part, one of educating and informing the people we work with about the value of and the remarkable affordability of today’s life insurance. If the public were better informed about insurance it would make our jobs easier. If we can demonstrate the real cost of life insurance and help them understand why it is important to have coverage for their families, the natural result will be more prospects and better sales.So if the population thinks life insurance is expensive or they don’t really need it, it is our job to educate them. Think about how you can expand your efforts to help educate your clients and your community about the importance of life insurance. An active approach to this can lead to more business for you.
John Schraut, Life Sales Manager