ELITE ADVISOR BEST PRACTICES
Key Person Disability Coverage
The same drive and fearlessness that propels many execs to the top can make them susceptible to extreme risk taking. Here’s how to protect their families and companies from undue hardship.
By Ted Tefaro
- The loss of a key executive due to a death or disability can have devastating consequences to a company’s bottom line.
- The sophisticated advisor should consider key person disability for all their clients who are successful professionals and business executives.
- Lloyd’s Key Person Disability contracts are often designed to deploy capital to the firm for a period of one to two years. If an executive cannot return to work, the same policy can carry a lump sum distribution in excess of $125 million.
Last October, 51-year-old executive Andy Wirth jumped into the sky near Lodi, California, with unfortunate and devastating consequences. Due to changing winds, the skydiving enthusiast missed the landing zone, crashed into a vineyard and collided with metal stakes, wires and tangled cabernet vines. The crash left Wirth with a butchered right arm and fighting for his life. After 50 days in the hospital and 21 surgeries to his arm, Wirth has returned to work on a two-thirds schedule.
Wirth is the CEO of Squaw Valley Resorts, and his accident had a profound impact on his company, not just his family.
An accident like Wirth’s, where life can change in a flash, underscores the importance of using an insurance specialist to protect key human capital. The loss of a key executive to a death or disability can have devastating consequences to a company’s bottom line. It can also undermine investor confidence and erode market capitalization.
Make sure your insurance professional has the authority to design and execute Lloyd’s Key Person Disability contracts with benefits payable to the corporation up to $500,000 per month. These policies are often designed to deploy capital to the firm for a period of 12 or 24 months, and in the event an executive cannot return to work, the same policy can carry a lump sum distribution in excess of $125M.
We highlight events like Wirth’s to drive home the fact that accidents do happen to key executives. Life insurance advisors understand how to protect key person exposures from death. However, the risk of disability is often three to four times more likely to occur during a high-income individual’s working years than their retirement years.
Call a high-end life and disability insurance specialist to discuss how you can protect your client and other key personnel from the greater risk of disability to those who are truly irreplaceable to their firms.