Safeguarding your keyperson to safeguard your business 

Issue 3, July 2024 I PCS Vision

Sometimes a single person is so central to a business that their sudden and permanent absence has the potential to have a profoundly detrimental effect. How do you mitigate such a risk?  Read on to see how we help this successful regional business protect its continuity and bolster confidence.

PCS by Mercer client is a CEO and 90% shareholder of an East Asian company. A male in his 50s, our client recently led a management buyout of the successful company from its previous owner – a multinational conglomerate.

The savvy CEO perceives a pressing need for Keyperson Protection to secure a substantial cash payout in the event of his sudden demise. The payout would help ensure business continuity. He has very real fears – in his sudden absence – the company might be targeted for hostile takeover by competitors. And if a takeover or merger occurs, it is likely to cause adverse consequences for the employees.  

Our client is also keen to introduce stability and confidence after the period of changes during the management buyout.

Our client is seeking Keyperson Protection because not only does it provide immediate financial safeguard to the business, but the right Keyperson Solution can also function to bolster psychological confidence in business continuity: internally – to his staff, and externally – to the company’s creditors and business partners. The client is very specific in his needs: 

1. Provide liquidity to facilitate protection of business continuity in case of client’s sudden demise
2. Timeliness of policy inception
3. Minimize effect on the company’s cash flow as a result of policy inception
4. Competitive solution pricing 
5. The client was already considering an offer through another insurance broker when PCS by Mercer met with him. 

We expedited the health checks and inception processes to meet our client’s urgency and presented him with a number of options in a very short timeframe. 

The possible solutions were competitively priced because PCS by Mercer has strong relationships with a breadth of insurers. Multi-pay options were presented to help smooth out the company’s cash expenditure. 

The client chose an Indexed Universal Life solution noting the full death benefit will be paid in the event of his sudden death, regardless of whether the premium has been paid in full. 

Total sum assured: USD 3M 

Premium: USD 1M (USD 200,000 x 5years)

• In case of unforeseen demise of business keyperson, business continuity is more likely to be safeguarded through liquidity generated from Keyperson Insurance. 
• Multi-pay arrangements allow a company to better manage cash flow. Insurers will pay out death benefits in full if premium payments are up to date – even if the full premium has not been paid. That said, it's important to note that in order to enjoy this benefit, the client would need to elect the appropriate rider, and nominal costs may apply.
  
• PCS by Mercer consultants will leverage our strong industry relationships to help our clients achieve competitive pricing. 
  

* This case study is based on a real-life couple. Some details have been changed to preserve privacy.