|
Key Person Disability
Disability insurance provides the replacement of income for a person who is disabled. The disability of an individual may create adverse consequences for the business with which he or she is involved:
- the loss of the services of the disabled employee by the business. This of course creates serious problems, particularly for the small business, as it generally is not easy to replace the services of a key person. With that person gone, the business suffers; profits will probably go down. In most small businesses, some effort is typically made to continue the income of the disabled person; this means a serious increase in cash outgo at a time when the income of the business maybe seriously impaired. [For a further discussion of this situation, go to Disability Coverage.]
- The second situation in which a business is affected by disability is less obvious. When a person with an ownership interest in the business or corporation becomes disabled, it may be advisable to buy that interest. This, of course, may be difficult if adequate funds to make the purchase are not available. The disabled owner or co-owner may make claims upon the business, feeling entitled to some share of current business income because of past contributions. This is a difficult situation for the remaining owners, to say the least.
- Today, there is insurance available to meet these situations and pay income to a business to replace a key person. There are also other coverage's available for the key person, such as a policy that will make payments designed to assist in the purchase of a disabled co-owners interest, called disability buy-out protection. [back] [next]
|
|
