key-person-insuranceKey Person Disability Insurance delivers cash benefits to a business in the event a key employee who is critical to the success of the business can’t perform their substantial and material duties due to sickness or injury.

The business is the owner/premium payer on the policy and benefits are generally received income-tax free. Benefit payments are distributed on either a lump sum or combination of a lump sum and monthly benefit basis. Unlike business overhead expense policies, the business is allowed to utilize these key person benefits at its own discretion. This is an important feature to consider while performing a risk analysis for a business owner.

The Market Opportunity

Business owners recognize and reward key employees in a variety of methods. Rainmaker’s are highly compensated and enjoy rich benefit plans to encourage growth and promote stability. While many businesses take the appropriate steps to retain their key employee’s, many fail to mitigate the economic risk associated to losing this Rainmaker to a disabling injury or sickness. In fact, a study released by Principal Financial Group revealed that half of the business owners polled did not have a disability plan in place for themselves or their key employees.  This exemplifies why it is critically important to probe if the business you’re advising has a key person contingency plan in place.

A disability lasting six months or more could place a business in the ICU if this Rainmakers professional skills, relationships or intuitive intelligence correlates to the success or failure of the business.

The Affordable Solution

Carriers are willing to offer a lump sum benefit up to three times the Rainmakers salary, payable directly to the business. Ironically, this benefit amount aligns proportionality with the projected cost to search, hire and train a highly compensated individual from a report published by the Center for American Progress.

Sweet spot candidates for key person replacement coverage are medical and advanced degree white collar professionals ranging from age 30 to 54.  They are highly compensated employees or business owners with less than 50% ownership in a small to medium sized business or medical practice.

Below are sample premium rates from Principal Financial Group illustrating the monthly cost for a $200,000 lump sum key person replacement benefit:

Sample Monthly Premiums For A $200,000 Lump Sum Benefit

Principal Financial Group













Assumptions: $100,000 annual salary, lump sum payout, 180 day elimination period, nonsmoker and 4A occupation class.

The Action Plan to Success

Disability Insurance Services has the key to help you unlock the deadbolt encasing many businesses who are not prepared to face the consequences of losing a key employee or owner. Take the first step by educating your business owner clients with our BCAM e-blast offering. Branded with your agency logo, an e-blast is sent promoting the benefits of key person replacement coverage. A link is embedded in the blast for your business owner to request an illustration. This quote link is also branded with your agency logo. Your client enters their data and Disability Insurance Services will send you their personalized quotes by close of business the next day. There is no simpler way to meet the needs of your business owner clients while ensuring your fiduciary responsibilities are met.

If you have an immediate key person replacement coverage need, click here to submit your quote request through our web portal.

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