Business and financial success depends, in part, upon sound risk management. At Burnham Gibson, our financial advisors are also licensed insurance agents who focus on in helping to protect businesses from the fallout that can occur from the loss or disability of an owner or key employee.
While it may be difficult to consider these scenarios, properly preparing for them can yield tremendous peace of mind. For business owners and executives, our risk management and insurance services include:
For partnerships of various kinds and closely held corporations, a buy-sell agreement provides for the orderly transfer of ownership interests when one of the owners passes away, becomes disabled or retires. The agreement describes the terms under which the co-owners would buy out the affected partner’s interest or redeem stock. It states how the business value is to be determined, the circumstances under which a buyout would occur, and how the agreement would be funded. All of these details are worked out calmly, at a time when no one knows who the surviving partners will be or whose family will need protection.
Unfortunately, many companies execute a buy-sell agreement without providing or planning for the necessary capital to facilitate the buyout. The trigger under which a buyout would be initiated could be death, disability, or retirement. Since death and disability are two provisions that usually come unexpectedly, it is important to plan in advance determining the appropriate amount of life and disability income insurance to provide the necessary funding to facilitate a buyout of the deceased or disabled partner’s share.
The assets of a business, such as cost effective machinery, modern technology, and ample working capital all fundamentally affect its profits. However, it is the experience, knowledge, skills and abilities of the management team – as well as the specialized talent of other key employees – that combine capital, labor and materials into sustainable profits. The loss of such employees can cause profits to shrink or even disappear.
What would the loss of a key person mean to your business? Disruption of management, loss of earnings and customers, delayed product launches and revenue loss are just a few issues that businesses can face if there is an unexpected or premature death.
Life insurance is a common way to ensure that your business is sufficiently funded to replace and train key employees. It can also be used as part of a non-qualified benefit program, usually offered to enhance retirement benefits for your key person.
Your key employees may have many types of insurance in place to guard against unexpected tragedies. Life, health, auto, and homeowner’s insurance are the types of insurance that most of us maintain as a matter of course. However, what happens if an individual does not pass away, but becomes too ill or handicapped to maintain employment? Disability income insurance provides financial protection in the event that an individual is unable to work due to accident or illness. It provides a monthly benefit after a specific waiting period for a predetermined benefit period that typically coincides with the individual’s working years.
* Burnham Gibson IARs are also, separately and apart from Burnham Gibson, registered representatives who offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI and TN), as well as agents who offer insurance and annuity products through Equitable Network, LLC, which conducts business in CA as Equitable Network Insurance Agency of California, LLC, in UT as Equitable Network Insurance Agency of Utah, LLC, and in PR as Equitable Network of Puerto Rico Inc.