The vice president of sales and recruitment at DeRosa and Associates in Tennessee, Chester “C. Edziu” Pacana manages insurance and annuity agents in Tennessee and Florida. Under the leadership of Chester Pacana, these individuals educate clients about and market a variety of insurance policies, including whole-life, term-life, and key person life insurance.
Key person, traditionally called “key man” insurance, is bought by a company with the purpose of protecting the business against the loss of key individuals. This may include the owner of the business, a top salesperson, or any other employee whose death would significantly affect the success of the company. To determine how large a policy a company needs, there are several different calculations that can be used. One is determining the cost associated with replacing the key employee being insured. This includes the cost of finding the replacement and training that person for the position, along with the estimated revenue lost due to the lost employee. On average, this number is roughly 10 times the earnings of the key employee. Aside from calculating the cost of replacement or multiplying salary, companies can determine what percentage of their overall income the key employee is responsible for. This percentage should then be multiplied by how long finding a replacement would take. For instance, if a key employee is directly responsible for 10 percent of the revenue of a million-dollar company, that individual brings in roughly $100,000 each year. If estimates say it would take five years to completely replace this individual, the business needs a key person policy of about $500,000.
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AuthorChester Pacana - Experienced Conservative Wealth Management Planner. Archives
July 2019
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