Hey, Smarter Vets, this is CJ Burnett, one of the co-owners and co-founders of Florida Veterinary Advisors. Today I’m going to talk to you about key person insurance. So many people have not heard of key person insurance. In fact, a lot of the times when I ask, I actually have some people say that they have it, and then I say how much, and then they say full coverage, and it’s like, that’s not, that’s a different thing.
So key person insurance is insurance that a business would get on an employee in order to cover for the unfortunate, awful loss of that employee because of an unexpected death. I know no one likes to think about death. Death is icky, not fun to imagine one of our employees dying, but oddly enough, a lot of business owners will go out and they’ll buy insurance policies for their employees and on their employees in order to allow for the organization to not see the financial loss that would be experienced at the loss of a key person within that practice.
Sometimes it’s a manager of the office who you know that if without that manager the office couldn’t run and in fact replacing them would be really really hard. You need a lot of money to pay somebody new to come in and learn your business and your practice and how things work and basically get up to speed in order to run the office in a successful way as that person that may be passed away would have done. It might be a veterinarian who has a very specific skill.
Maybe they offer a very specific service or surgery or something in your practice. It would be someone who, if they did in fact pass away, God forbid, then you would see a massive decrease in revenue. you would see enough of a financial loss that it would cause a major hiccup.
And perhaps if you are a business owner who are say within five to 10 years of retirement, you also think about this in the form of if that key person passed away, and you are going to essentially sell the business within the next five to 10 years and they pass away just at the wrong time, then that upset could actually cause a massive pullback, possibly millions of dollars in your business right at the time that you’re trying to sell it.
And so key person insurance can also be any doctor that you have in your practice that maybe has a large loyal base that if something again, it’s a key employee, somebody in the business that produces revenue or has some large impact on revenue. And you basically can get life insurance in order to protect in the event that they pass away prematurely, the business can still have funds on hand in order to absorb the loss from a financial situation because we all know that we’ve actually lost people in our business to that unfortunate event.
And let me tell you, it’s not a financial thing. I mean, it ripples effect on culture, on people. It really can harm the business, not just from a financial perspective. and it does, it wrecks it from an emotional perspective for a good amount of time. And so it might take some time for even the people in the business to recover from something like that.
So if you haven’t thought about key person insurance, this is a video just to kind of throw it out there. Hey, look, if you’ve got key people in your business and you want to try to get life insurance on them, I also stress please don’t go out there and like buy anything really put some thought behind it.
And in fact, if you need help, contact us directly, we can help you at least know what exactly to do, even though you may not even know where to go to even find it. My name is CJ Burnett. It was good seeing you. I’ll see you next time.
Video Summary:
When it comes to running a veterinary practice, some team members are simply irreplaceable—whether it’s a skilled surgeon, a trusted office manager, or a veterinarian with a loyal client base. Losing one of these “key people” unexpectedly can create both emotional and financial turmoil.
Key person insurance is a life insurance policy a business takes out on a critical employee. If the unthinkable happens, the policy provides funds to cover lost revenue, recruit and train a replacement, and keep operations running smoothly.
For practice owners nearing retirement, the stakes are even higher. The sudden loss of a key team member could significantly reduce the value of the business, potentially costing millions at the time of sale.
While it’s not pleasant to think about, planning ahead ensures your practice—and your team—can recover and move forward. If you’re unsure where to start, seek guidance before taking action.
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This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27