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When you take out company life insurance on employees, you help your business in several key ways. Firstly, your shareholders can feel more secure that the company will stay solvent in the unfortunate event of an executive’s passing. Secondly, the benefit acts as a key incentive for your executives to stay with your company. Thirdly, a cash value company life insurance on employees can guarantee your company a more impressive rate of return than any other safe kind of investment can provide.
Regardless of how large your company may be, your investors and other owners need to be aware that there is a continuity plan in place. While there should never be an irreplaceable employee, it is often tempting to think of key employees as being crucial to the continued operations of the business. In the unlikely but nonetheless possible event of an important employee passing on prematurely, the entire company can be put into a panic. Particularly in the case of a company that is either public or considering becoming public, this can be disastrous.
When you take out company life insurance on employees, it shows your shareholders that your company is prepared for many eventualities. While nothing can replace a brilliant executive or other company asset, the knowledge that the company will at least remain solvent until a suitable replacement can be found is comforting.
Executives are just one of a group known as “”sneaker assets.”” These are employees whose range and level of skills make them able to find work nearly anywhere they may go. Since your company needs its best people to stay on board, it is crucial to keep these individuals by any reasonable means at your disposal. Most every business offers as many perks as it can, but many businesses simply overlook company life insurance on employees. Life insurance is often erroneously considered to be a personal planning decision on the employee’s part, but this is not the case at all.
With a company sponsored policy, one or more important employees will know that if they are to pass on suddenly their families will be on stable financial ground. Since most executives and other established employees have large family obligations and consider these to be their top priority, this can be a powerful incentive to stay. Thus, taking out such a policy is more than a mere business expense. Company life insurance on employees is also a tool for retaining key employees who will continue to help your business to grow and prosper.
In the current interest rate environment, a company that has unneeded capital is often at a loss as to what to do with it. While making acquisitions is sometimes a good idea, often such acquisitions divert employee time and attention away from the company’s core operations. In the same vein, keeping cash in many kinds of risk-free accounts does not generate a reasonable rate of return. There are even occasions when further investments into the hiring and further training of employees is not even the most reasonable use of capital.
This is where corporate owned life insurance on employees becomes potentially profitable. Through the use of a company policy, you can earn a high and protected rate of return. The level of risk is minimal, while the rate of return is higher than nearly any other passive investment. Employee time is saved on extraneous operations, your capital is put to constructive use and you do not run the risks associated with more speculative investments.
Company life insurance on employees is a highly valuable way to invest your company’s capital. Taking out such a policy can help to retain valuable employees, limits your level of downside risk and can reassure your shareholders that the company will remain stable, even in the event of an unfortunate occurrence.