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Pre-Funding the Loss of a Key Employee

Pre-Funding the Loss of a Key Employee

Most businesses do not have the necessary funds on hand to meet the unexpected costs related to the loss of a key employee. There are three methods commonly used to finance the potential loss of a key employee.

Sinking Fund

Money can simply be accumulated in a savings vehicle. However, dollars accumulated for potential losses can also represent lost business opportunities.

Borrow

This option assumes that the loss of a key employee or owner/key employee does not seriously damage the company's ability to borrow money. If money is borrowed, it also must be repaid with interest.

Life Insurance

Many business owners choose life insurance to protect themselves against the loss of a key employee. The premiums are small compared to the lump sum that would have to be quickly available when a death occurs. Learn more about life insurance as a solution.

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Last Updated: 12/14/2017