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“Key person” life insurance
WHY do YOU NEED "key person" life insurance?
Are you an owner or partner of an Alberta business? A “key person” is someone who is responsible for the success of a business or organization. It can be an owner/partner, or an employee whose skills and intellectual capital are extremely valuable for the company.
The loss of this person would affect the business and the company could suffer financial losses. Additionally, it would be hard to replace this person.
One of the options for a business or organization is to have protection by purchasing Life Insurance for this “key person” that will help cover some expenses, such as:
- Making up for lost revenue
- Recruiting and training a replacement
- Overhead expenses until the business is back on track.
We will help you identify how much coverage your business will need if your company loses the key employee or partner/owner. We will also assist with finding the best way to set life insurance with less tax implications for your business.
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What do you think will happen if your business partner dies?
Many businesses have several partners, at least more than one. There are plenty of stories when one of the owners lost their partner and had to deal with the family members of the deceased who are not sure what to do with the business. Sometimes it is challenging to negotiate with the relatives of the deceased partner. In such circumstances, the business can be under great threat.
Buy-sell agreements will help you protect your business from similar situations. A lawyer may help you set up a buy-sell agreement. However, not all business owners have enough savings to buy out a portion of the business.
Here we can use the service of insurance companies to provide enough funds to buy a portion of the business.
There are different options how to structure a business agreement:
- Cross-purchase agreements – is often funded through criss-cross insurance. Each business partner purchases a life insurance policy on the life of the other partner and names themselves as beneficiary. If one of the partners dies, the surviving shareholder will be required to purchase the shares of the deceased.
- Redemption agreements – is often funded via business-owned insurance. This is an agreement between partners in a company that allows the shares of the deceased partner to be bought by the company.
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Group Life Insurance
Group life insurance is offered by employers to their employees
Group life insurance can also be available for business, retail or an occupational association, alumni for a specific university, etc.
The most common group is the employees whose employers want to attract their workers by offering good benefits.
Usually, employers will set up a limit for coverage in one or two annual incomes. For example, if an insured has an annual salary of 80,000 CAD, this will be the coverage the insured will be eligible for. If an employee leaves the job, no more benefits will be provided.
Many people want to find employment that provides a full package of benefits. It is also beneficial for the employer as good benefits will attract more talent, and premiums can be deducted as business expenses.
Group insurance is especially beneficial to people who could not get individual coverage based on their health as there is no medical underwriting for the group.
Group life insurance often includes Accidental Death and Dismemberment (AD&D) insurance.
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Group Health Insurance
Group Health Insurance - attract and retain top talent
Offering good benefits package is one of the best ways to express your gratitude and respect for your employees. It will allow you to remain competitive in the job market and what’s even better, you can deduct premiums as business expenses, reduce staff turn-over and attract top talent.
Group Health Insurance covers what is not covered by provincial health insurance, such as:
Group health and disability/critical illness plans
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Health Spending Account
A health spending account is a great flexible plan for employees
A health spending account is an alternative to a group insurance plan, which offers more flexibility to employees in terms of benefit choices.
Only incorporated businesses can open an account, and only employers will be allowed to make contributions and have to provide coverage for all his/her employees, but everyone can have a different maximum amount.
You can find allowable expenses on the government website.