When formulating a business protection plan, we commonly find that business owners have insured their business premise, its contents, equipment, and inventory. However, many business owners do not extend their business protection plan to consider employee retention and succession, nor the negative impacts that the business owner’s disability or premature death could have on the business’ ability to continue operations.
Employee Retention and Succession Planning
Employee Retention and Succession Planning are one of the greatest challenges a business will face. With rapid transitions between roles and businesses becoming increasingly common, talent may be easier to find, but it is much more difficult to retain. Remember, generational diversity is escalating in the workforce. Research shows that approximately 10,000 baby boomers reach retirement age daily, and millennials now account for one-third of the workforce. The result: millennials are leapfrogging into positions of leadership and other roles of responsibility, and baby boomers are retiring and taking their knowledge, skill, competency, and experience with them. To mitigate this “knowledge drain” as a result of baby boomer retirements, Supplemental Executive Benefits—benefits that go beyond traditional qualified plans—are a tool that businesses can deploy to encourage staggered and planned-for retirements. Additionally, the implementation of Supplemental Executive Benefits is also an effective way for a business to recruit and retain its key talent.
Disability strikes without warning. It is unexpected, unwelcome, and for many business owners, it can be financially devastating. During the working years, it is far more probable that a business owner will suffer a disability, as opposed to premature death. In reality, 3 in 10 workers entering the workforce today will become disabled prior to retirement and 1 in 7 can expect to be disabled for 5-years or more prior to retirement. Disability Insurance protects the business owner by providing supplementary income in the event that an illness or accident results in a disability that prevents them from working in their business.
Business Overhead Expense Insurance can then cover the costs of business while the business owner is disabled. Covered expenses include the paying of wages, debts, rent or mortgages, and more. This, however, does not cover an owner’s lost wages in the event of disability. Personal disability insurance coverage, as described above, is best used for that. Additionally, individuals can apply for Loan Protection Insurance, which covers debt payments on certain covered loans if the insured loses their ability to pay due to a covered event, such as disability.
Shareholder Protection Insurance provides a lump-sum payout in the event of a business partner’s death. Its sole purpose is to protect your business by providing adequate funds to purchase some or all of a deceased partner’s share at a pre-agreed value, which is memorialized, along with terms and conditions, as part of a “Buy-Sell Agreement.” Without Shareholders Protection Insurance, the surviving business partners may not be able to raise enough funds to repurchase the deceased partner’s shares. Without this protection, the deceased’s family would not receive any money from this sale, and could result in the family selling the shares to a competitor instead. Worse, the family could become “dead-weight” within the business; drawing an income, but not being able to contribute to the company’s success.
With the right support from qualified industry experts, planning for retention and succession, disability, and premature death no longer has to be a daunting task. By planning ahead, business owners can protect their hard work, and ensure that their business can keep running beyond retirements, and unexpected disability or premature death. Learn more about how to protect your business with TriscendNP.