Posted: Mon Feb 25, 2008 6:26 pm Post subject: Key Person Life Insurance
Many businesses are highly successful due mainly to the talents, expertise and efforts of one important manager or employee, sometimes referred to as a "key person".
If you were the business owner and wanted to purchase a "Key Person" Life Insurance Policy, how would you arrive at the "monetary worth" of this individual to your business? _________________
I would look at the replacement value of the person, we recently did an information gathering on the cost of turn around, it is amazing. Here is a page that will show you how to calculate or attempt to calculate if you had to replace that key person today. http://www.yourhireauthority.com/article_08.html
Posted: Tue Feb 26, 2008 6:52 am Post subject: tough job..certainly!
hi all..
I feel different things have to be taken into a/c while we are trying to ascertain the true worth of a key employee. We sh'd never forget that these employees who we term as our 'key employees' know the in-n-out of the entire functioning of our systems. Thats why the new person getting into their shoes would need to cope with a lot of challenges ahead, they need to go through a process of self-training, apart from the systems they need to figure out the expectations of different job-levels from the position that he's gonna hold as also the expectations of the management in terms of their dependencies.
He needs to adapt faster & keep a note of everything as he increases his pace ( this is due to the fact that the more time he takes more effect it will have upon the returns). It would be a tough job on the HR's part too!
It would be difficult for the HR to call upon suitable candidates, showing them the lucrative side of the offer & conveying the expectations of the top management. Best of luck for such brave-hearts
So, you see why it is difficult to guess the right worth of a 'key employee policy', its always better that we open up in front of the insurance advisers about the worth of such positions in our organizations with respect to both the workability as well as the risk-taking dependency factors! Closedealer-yahoo _________________ Register Now to have your Insurance queries solved.
We discovered much of the same Closedealer-yahoo when we were pulling together information for one of our consortia, there fear is when their older, more experienced workers retire what the costs will be to replace them, younger people are not staying with the companies as long these days, they and we were looking at the reality of the situation and what to do to keep people in place, weather it be money, benefits and etc. Some of these positions take years of experience to learn, loyalty is a big factor in these situations.
In my husbands job (coal miner) they go far beyond what it takes to keep their current employees. They get raises every few month, increased health insurance and death life insurance benfits and the longer you stay they add even more incentives. I know his job is a dangerous one but I believe they really take that into consideration too. Down there (below all of us) the more experience the better. The company strives to keep the experienced workers. I think a persons time on the job should always be a key factor with other things considered of course.
Each and every employee or manager is different and brings a multitude of talents and experience to the table.
Determining the exact value of a "Key Employee" may be at best a Qualified Guess based on many factors which may include:
1. Experience of Key Employee.
2. Value of contacts and relationships with suppliers, customers, employees and management.
3. Performance results and trend of results over past several years, related to Key Employee's efforts.
4. Increase in ROI for company as a result of Key Employee's efforts, and improvement in ROI since Key Employee has been in current position.
5. Average Annual Compensation in your industry for Key Employee position.
6. Compensation package for your Key Employee.
7. Estimate of results without Key Employee.
8. Transition time for hiring, training, and transitioning new hire for Key Employee's position, and the cost associated with this hire, including effect on revenue and ROI.
To answer your question, arriving at a number would be difficult, and depend on the company, Key Employee, and many other factors.
To say that you just multiply the Key Employee's income by 7-10 times would not work.
I suppose you begin by determining the net effect losing the Key Employee would have on your firm, then factor in the time and cost to replace the Key Employee and get your business back to its level of production before losing the Key Employee.
But, I'm not quite sure what the formula would be to factor in those variables. _________________ Visit http://www.term-life-online.com to learn how term life insurance works and compare free quotes today.
You bring out some good points about the persons experience, especially in a dangerous job like coal mining, we have a lot of it around here, every now and then you hear about a mining fatality, always so sad when it happens. That company your husband works for is smart to handle their personnel this way, it makes good business sense.
believe it or not they just had a mine fatality on Monday. The first ever in his mine. Some outside surveyor was where he wasn't suppose to be (in a shuttle car runway) and got hit by the shuttle car. He died on impact. Everyone is very upset even though they know it isn't any fault of their own. The mine is offering counseling to anyone who needs it , free of charge and will pay them for the time they need to overcome this. I thought that was extrremely generous. The employees are taking up donation this week on their own to send to the family and the mine company is sending them a check to help out in whatever way. I was really proud when I heard of this effort. We will definately be contributing.
If you had an IT person in your business and this person had designed a special piece of software that was selling like hot cakes and making your company rich, how could you possibly arrive at a reasonable dollar amount to replace this person, the lost sales, and the amount it would take to hire another person equally qualified? _________________
