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Key-Man Insurance

Every successful business has one of more key employees that carry the success of the business on their shoulders.  It may be the president, partner, plant manager, sales manager or another employee who makes a difference to the bottom line of the company.  Whoever that person is, the death of this valuable key person will obviously bring a loss to the business, loss of talent, loss of knowledge and information and will bring high costs to the company in securing and developing a competent successor.

Key Man or Key People Insurance provides cash to a company through life insurance benefits should one of the key employees die unexpectedly.  This is the most effective method of offsetting the loss of a key person by an unexpected death. 

Key People can be:

  • Owner/Managers
  • Employees with special skills or talents
  • Employees (sales people) with strong ties to valued customers
  • Top salespeople skilled attracting new business/customers
  • Designers/Inventors

Benefits:

  • Money will be available at the time it is needed as an emergency fund and to keep a business running
  • Helps cover loss in profits during the readjustment period
  • Assures creditors that loans are safe and credit is protected
  • Assures customers that the business will continue operating
  • Guarantees tax-free fund to the organization at the time it is needed.
  • Provides necessary cash to allow a new employee to be recruited, hired and trained.

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Buy / Sell Insurance

Planning for the loss of a business owner or partner is crucial to ensuring the continuity of your business and protecting the financial security of your family and the families of each partner or co-owner.
To protect your business, your loved ones and your co-owners or partners, you can implement what is known as a buy sell agreement, which specifies what will happen to the interests of a deceased owner, partner or shareholder. If your company's buy sell agreement requires the surviving owners or partners to purchase the deceased's interests, you can use life insurance—rather than personal funds or business assets—to fund the buy sell agreement.

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Wage Loss Replacement/Salary Continuation Plans

A plan or agreed contract arranged between an employer and employees, or between an employer and a group or association of employees, under which benefit payable arrangements are made for an employee on a periodic basis if an employee suffers a loss of employment income due to an illness, pregnancy, or accident.  
The premium paid for the grouped individual disability insurance policies is a deductible business expense and is not considered taxable income to the employee.

Benefits To The Employer
  • Premium contributions are tax-deductible
  • A stable and predictable business expense
  • May help attract and retain key employees
  • Help avoid the cost of continuing salary payments for a disabled employee
  • A group premium reduction may be available if three or more employees apply together

Benefits To The Employee

  • Quality individual non-cancelable disability coverage
  • No premium payment while under the Wage Loss Replacement or Salary Continuation Plan
  • Portable coverage Return of premium benefit goes to the employee
It is generally less expensive for the employer to pay the premium under a Wage Loss Replacement or Salary Continuation Plan than it would be to increase the employee’s income to allow him or her to pay the premium on a personal policy. Annual net savings with these plans for a 40 year old male non-smoker can be about $600.

Wage Loss Replacement or Salary Continuation Plans are great for critical illness as well. The benefits to the employer are the same as above although the benefits to the employee are slightly different as the benefit may be tax free and the premium paid is non-taxable income to the employee

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Corporate Estate Bonds

In many businesses, the retained profits or surplus cash are invested in GICs or other taxable investments.
This is often the case when the owners don’t need the extra income and have a higher marginal tax rate than their business.   But, the government will take a chunk of the investment income in tax.  How do you protect your savings from going to the taxman?

The best option is to invest your company’s invested profits using an innovative concept known as a Corporate Estate Bond. This is ideal for a corporation or owner who can benefit from a higher immediate estate value, higher tax-free death benefit paid to heirs, has retained earnings available to invest, and can benefit from a tax-deferred investment.
When you die, the corporation receives the proceeds of the policy tax free, plus a credit to its capital dividend account (under current tax laws). Capital dividends may then be paid out to your estate tax-free. It also allows you to move corporate investment dollars from a tax-exposed environment to a tax-deferred one, allowing you to increase the amount you give to your heirs or favourite charity when you die.
To find out more, contact a Sound Wealth Advisor. 

 
 
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