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key members who are vital towards its functioning and its success. Key people are not necessarily among the top management, which runs the company but even high-performing salesmen or production engineers or administrative heads.
In case of the death of one of these individuals, the organisation will suffer a definitely monetary loss in terms of its financial performance as well its creditworthiness. The loss will take some time to recoup before others can be trained and inducted to take their place. Besides the time and money invested in the training can make it an unnecessarily expensive proposition.
If the firm opts to take life insurance policies like the Keyman insurance policy on the lives of such individuals, it would definitely protect the firm from any loss of profits or earnings that would result from the death of any of its key employees.
The chaos that might result subsequent to the death of the firm's key employees will also require the expert services and consultations with legal luminaries and experts before the situation can be rectified. Needless to say, lump sum payments for services rendered are not an attractive option considering the fact that a bulk of such payments would be classified as taxes for the receiving individual.
It is advantageous for the firm to buy an Immediate Annuity policy or a Deferred Annuity policy that will provide payment through fixed timely amounts over a number of years. Thus the tax assessment for the outside expert will be charged over a longer period of time instead of the total amount in one and the same year.
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