Key Person Life Insurance | 2022 Costs, Taxes & Quotes

Identifying Your Key Person

A good test for identifying your key employees is the size of their salary. Of course, a high salary is not the “end all be all” for picking a key employee. However it is good way to identify that this employee is believed by management to be an asset and is valuable to the business.

Another way to ID a key employee is if they have a role in decision-making. Does your employee make important managerial decisions? Do they have  influence over the decision-making processes? If the answer is yes, then they could be considered invaluable to your company’s success. Such a person is a key employee.

Some other key employees are those who work directly in the areas of:

  • Accounting
  • Production
  • Sales
  • Management

Sales: Sometimes a person who has clients or customers can be identified as a key man. Their role is invaluable because their death may result in the loss of a huge portion of the business.

Capital Source: An obvious key person is someone who represents a significant source of capital in the company. This can be direct or indirect. For example, through their reputation in the community or their influence with lenders. There are times when a lender will request a specific co-signer when a business loan is taken. Naturally, if the key man were to die – it cause a horrible effect on the company’s available sources of capital.

Talent: If your employee has a unique talent, they may be considered a key person. If a key person holds a unique and valuable position, regardless of their job duties, and their talent would be difficult and costly to replace. This would also be costly to the business if the keyman died. 

Leave a Reply

Your email address will not be published.