DHill Financial

Trusted Insurance Adviser since 1990

Tag: Disability Income

Why your top Sales Executives deserve a raise

DHill Financial, Sales Executive, Insurance, Key Man, Trust, Split DollarLike any business that continues to succeed and flourish, it starts with a great idea, but that great idea goes nowhere without the ability to sell the idea to others.

Businesses recognize the key role their top sales professionals play in the overall success of the company, and elite sales professionals are often among the highest compensated employees at a company.

But is that enough, and even more important, how can you protect those assets?

Here are three questions to ask yourself to determine if changes are in order:

1. What is the Sales Executives worth to the company?

Taking the emotion out of the answer; if you were to transfer the risk of losing the sales professional to an insurance company, how much insurance would the company be willing to offer?

Do you know how much protection a company would be willing to provide in the event of a disability which took a sales executive out of production or an unexpected death?  Having properly assessed the economic value to the business will allow an organization to continue to succeed and flourish even during unpredictable events.

Key-Man protection can replace these economic losses to the business.  Insurance companies will typically offer up to 10 times salary for Key-Man protection. Take the sales professional who brings in $20 million of business to a company and is earning $300,000 a year; the employer may be limited to a key man policy that replaces $3 million (or 15%) of that revenue should something happen to the sales professional.

2. Does the Sales Executive feel valued and appreciated?

Many top sales professionals have lucrative sales incentive plans to help drive the type of sales behavior desired by upper management. Many of the same traits which make sales people successful in business also make them tougher to manage as employees; focus, drive, ego all play some role.

Employees like to feel valued, and especially those employees who use ego effectively to help reinforce the drive to succeed.  What message does it send to your top sales professional when you identify they are an important enough asset of the company to warrant additional attention… and protection?

Adding key man protection on the life of the Sales Executive in the event of a disability or a death sends a message that they are a key part of the success of the organization.  While firms work to avoid over-dependence, they also run the risk of not demonstrating how much the Sales Executive means to the company.

BEWARE, if you decide to buy Key Man on your top people, but not for your top people, that also sends a message.

3. Does the incentive package entice the Sales Executive to stay with the firm?

With fluctuating income, Sales Executives often find it hard to budget, plan, and execute sound financial plans. Employers can protect the value of their business, show the Sales Executive they are valued, and create an incentive plan to keep them happy through a split-dollar life insurance arrangement.

An employer can purchase a cash value life insurance policy for the sales executive where the employer retains some interest for Key Man purposes, helps the Sales Executive to defer some of their income, and provides them an incentive to stay with the firm.  Plans can be tailored around reaching Key Performance Indicators with a goal to have the Sales Executive reach a milestone to own the policy outright.

Contributions made by the employer to the plan on behalf of the Sales Executive are typically tax deductible making this an attractive tool to use as part of an overall compensation package.  This approach aligns the interest of the employer and the sales executive, creates an environment for long-term growth, and paves a strong path towards financial success.

 

David Hillelsohn, President DHill Financial, LLC an independent insurance professional.  David can be reached at 571.215.0361 with questions.  This is not meant to be tax advice, please consult a tax professional.

Income Protection Matters

Income Protection

You count on your paycheck every month to cover living expenses, create funds for entertainment, and hope to have something left over to save for short term and long term goals.  We expect our income to continually rise as we move through our career, but how would an unexpected interruption in our earning potential impact our ability to cover those basic living needs?  Funds for retirement may be in jeopardy to cover basic living needs let alone any financial resources we may allocate towards entertainment or personal rejuvenation.

Of course, economic and market changes may impact your earning potential; however this is cyclical and predictable and assumes you still have the ability to find other work to generate income.  An unexpected accident or illness is just that, unexpected, and requires a different strategy to meet our financial obligations as our ability to find work may be severely compromised.  Just because we are sick or hurt and cannot go to work doesn’t mean that our financial obligations like rent/mortgage, food, utilities, education expenses, alimony, loan repayment, etc. are forgiven.  In fact, we may add expenses in the form of medical care and therapy at a time when we are unable to earn income.

Disability Income protection is offered to protect our income if we are unable to work due to an injury or an ongoing illness.  Many people are eligible for Long Term Disability Insurance through their employer.  The fact that employers so frequently provide this protection to employees is an indication that this is a fundamental need for families, and for our socioeconomic system to keep people from needing to rely on public welfare programs in the event they become disabled.

Plans offered through an employer, however, are often not sufficient to meet the basic monthly living expenses for most families.  Often benefits provided under an employer sponsored LTD plan cover 60% of current income up to a stated limit, and that 60% is typically before taxes are withheld leaving the family with closer to 43% of current gross income.

The average group long-term disability claim lasts 34.6 months… almost three years, and one in eight workers will be disabled for five years or more during their working careers.   If you don’t think you could live on 43% of your current income, we can suggest a supplement to get you closer to 70% which would be your after tax income on what you are making right now.

Not ready to take a pay cut?  Let’s talk!  Request a quote today.  Contact Us

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