The recognized approaches look at the person’s contribution to earnings, the cost to recruit and train a replacement, and any debt or contract obligations that depend on them remaining. A multiple of compensation is sometimes used as a rough proxy, though it captures cost rather than contribution. Because the figure turns on how the business actually depends on that person, review your individual needs with a licensed agent or qualified advisor.
Related FAQs
Yes. Permanent policies may build cash value the business can access. We describe that as a feature, not an investment, and we will explain the tradeoffs. ...
Generally premiums for key person coverage are not deductible, and specific rules apply to the proceeds. Confirm the tax treatment with your CPA.
The business owns the policy, pays the premium, and is the beneficiary. Proceeds go to the company to help it absorb the loss.
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