What Is Key Person Insurance and Why Does Every Business Need It?

Today we're going to tackle a really good question. What exactly is a buy-sell arrangement? What even is key person insurance and why do I need to have it in place for my business? We want to go into understanding what exactly is a key person insurance, who actually qualifies as a key person in a business, like who would an insurance company actually insure, who doesn't qualify. Some people try to do some shenanigans when it comes to these sorts of things. How does an insurance company generally look at this? What are they looking to know and understand in order to get that person insured? Why would a business owner want to do that in the first place? And what happens happens if the key person later leaves the business. So maybe they're insured, but they get fired or they resign, they retire. What does that look like? And then how does this all kind of wrap around and connect to the infinite banking concept? And plus, we're going to look at a real-world story where key person insurance helped a business survive through a major loss. I'll give you a hint, it actually includes a plane crash and the fate of the entire business was at risk because of the situation. All right, so what exactly is a buy-sell arrangement? What, what even is key person insurance and why do I need to have it in place for my business? Well, we're going to tackle a really good question that we got from one of our regular listeners, JJ. Now, JJ, he's an avid listener. So thanks for all the great comments, JJ. Here was his question. If a business owner takes out a policy on a valued key employee, does that reduce the employee's ability to set up their own personal life insurance policy later, especially if that employee already has a certain human life value? Would the business-owned policy use up some of their available insurance capacity? So it's a really fantastic question. We're going to unpack this a couple of different ways. The short answer is generally no. That's the short answer. But in order to unpack this properly, we have to look at a couple other elements. Okay. So first thing, we have to understand that a legitimate business can own policies on a key person and that it doesn't reduce that person's human life value for their own family. In general, because the policy created by the business is for the business's purpose. It's the business's need that's being solved, not that individual person's need that's being solved. That individual person might have a mortgage and debts and credit cards and young children and might be the primary income earner. And so they have a valid, reasonable need of human life value for their own purposes. So that's really important to understand. Okay, so when it comes to planning for insurance, Well, one of the reasons we talk about that is because the infinite banking concept, we need to implement insurance as a tool in order to make that process work in our life. So understanding this is important. So it's a great question, JJ, but we want to unpack this even further. We want to go into understanding like what exactly is the key person insurance, who actually qualifies as a key person in a business, like who would an insurance company actually insure and who doesn't qualify. It's also important to understand that because some people try to do some shenanigans when it comes to these sorts of things. How does an insurance company generally look at this as far as what are they looking to know and understand in order to get that person insured? Why would a business owner want to do that in the first place would be an important question. And what happens if the key person later leaves the business? So maybe they're insured, but they get fired or they resign, they retire. What does that look like? Now, and then how does this all kind of wrap around and connect to the infinite banking concept? So we've got a lot we're going to unpack here today. And we're going to kind of go into some of the basics and then we're going to build up in phases. And plus, we're going to look at a real-world story where key person insurance helped a business survive through a major loss. I'll give you a hint, it actually included a plane crash and the fate of the entire business was at risk because of the situation. So we're going to walk through that, that story. I'll see if I can't screen share an article that we'll go over. So this isn't just a conversation about insurance. It's really about business continuity And it's also about control, control and liquidity. And these are key elements that insurance allows us to have. It also allows us to have peace of mind. It's about protecting the financial energy flowing through your business before life kicks you right up in the teeth, basically. All right. So let's talk about key person. What is it? Well, here's the basics. A key person, historically referred to as keyman insurance, is insurance owned by a business on the life or maybe the health on a critical person in the business. Okay. So that person's, that type of person could be the owner of the business, a founder, a partner in the business, could be a senior executive. It might be someone who's a top-performing salesperson or a specialized technician who's got some specialized knowledge, maybe a superintendent running a large job, could be a lead engineer, a head chef. So someone that holds a critical relationship with customers, suppliers, lenders, investors, the business in general. Um, the business owns the policy, the business pays the premium, and the business is the one who's typically listed as the beneficiary. So if something happens to that key person, the money comes into the business, so it helps it survive through the disruption that's created by the loss of that individual. I mean, ultimately insurance is all about insuring for a loss. In this case, it's a financial loss. So there's a financial loss if we were to lose this person in the business. That's the key criteria. The money could be used to buy out a partner's shares so that their family can move on. In fact, that ties to our story. We're going to go over a real-world case. It could be used to recruit a replacement person, hire and train new people, maybe pay off some debt, manage creditors for the business, keep the payroll going. It can be used to reassure lenders. They might require it. Customers, employees, investors of the business, depending on how big the business is. It could even be used to rebuild relationships with like suppliers and vendors because we have to fill a gap where that person used to do that and is no longer there. Most importantly, it can buy time so that the business can figure out what to do now that we've lost that individual. All right. Now, RBC Royal Bank describes this on their key person page really clearly, and it's a good article. Essentially that the coverage can help in recruiting, hiring, training, debt creditor, debt creditors, lender concerns, and reassurance of all these people that we mentioned so that the business can continue. That's really what the heart of this whole thing is. The key person insurance isn't about whether someone is a good person. All right. That might also be the case. And we hope that's the case. It's not about whether they're liked in the business. It's about whether the business owner— it's not about whether the business owner appreciates them. It's about whether there's a sudden absence of that person and they were removed. We pulled that person out of the business. What would there be a measurable financial loss to the business? And then how are we measuring that? What's the criteria? That's kind of how we get into some of the next stuff we're going to unpack. So what exactly makes someone a key person? Here's the question that every business owner should ask. So if you're a business owner, write this down, commit this to memory. And think about your own particular business right now. If this person, or if a person in my business disappeared from the business tomorrow, they were gone, what financial crater, what's the hole that would be left behind because they're no longer with us? That's really what you need to be answering for yourself. Okay? That's the key test. So, a key person is someone whose the absence creates a serious business problem. Not, not when I see a problem, I don't mean an inconvenience. Doesn't become a scheduling issue, but a real measurable financial problem. And then what are the signs that someone might be a key person that they can have a direct driver of a major portion of the revenue? That would be a sign. Maybe they hold a key customer relationship. They might control certain relationships with suppliers and vendors that help, you know, your business, like main suppliers. Specialized technical knowledge is a big one. It makes it hard to replace that person if you had to go headhunt them. You can't just immediately grab someone and jam them into your business if it's a highly technical and example. They might be responsible for running a major project, like multimillion-dollar project that's going on for your business. They might be tied to things like bonding, licensing, contracts, lender confidence. I mean, there's just so many different reasons. Okay. They could be a part of the brand. They might be a person who keeps the whole machine moving in some way. So let's use an example. You have a construction company. Now, I used to work in construction. I'm a recovering electrician by trade. Let's say you have a superintendent and they're running one or multiple million-dollar government facility projects. They've got a whole bunch in a portfolio. And that one project maybe is a one-year, two-year, three-year job, has major manpower requirements. There's timelines, there's multiple trades, inspections going on. There's, there's key elements we have to hit for performance. That person could very much be a key person, especially if they've been with the business for a while. If they're brand new, it might be harder to sell, but if they've They're doing that and they've done it for a while. They've got a demonstrated ability. Yeah, absolutely. That's a key person. If that person dies or becomes disabled, suddenly gone, the company could have to find another person to do that. They'd have to headhunt and bring someone in very quickly or lift someone up from within the organization to hopefully fill the role. And that's going to help keep the client confident. It's going to prevent delays. Delays could avoid penalties, which have financial costs. It could help keep trades coordinated so you don't lose sub-trades. There's a whole host of downstream items that could occur. So all of that has a direct impact on the business. So that person would be key. Now, let's take another example. The same thing could apply to a salesperson. Let's say you've got an organization and one salesperson, one sales individual brings in like 40% of your business revenue. That's a lot. That's a big, That's the big kahuna. And if most of your major clients deal directly with that person, then they have these key relationships. So separating that person out of the business is going to have a real major massive impact, potentially 40% of your revenue. So now you get to start to see, well, how will we determine the risk or the impact if that person leaves? And how will we defend it? Okay, so what about a lead engineer? You have an engineer, they've got a bunch of technical knowledge, maybe they're building AI chips or something like that. They know some specific things that nobody else does. And they understand that because this, this company's product depends on them being there. That would be a good indication of a key person. Same thing would apply to founders, the business owner, the CEO, etc. So all of that goes to like the— if the founder or the CEO goes, that leads to confidence. The whole thing could come crumbling down. How do we reassure everyone? We make sure that there's proper coverage in place. So it's all about economic impact. All right. Not sure if becoming your own banker fits your goals. Trying to figure out if this is even for you. Well, save some time. Look, our free 7 Simple Steps report is the fastest way to find out. It's designed to give you total clarity and focus your effort on what really matters. Plus, you'll get access to 4 of our bestselling books as a bonus. Go ahead, get it at 7steps.ca. That's 7steps.ca. Now let's talk about someone who would not be a key person. We're gonna flip this around and look at it from a different vantage point. Now, someone who's not a key person, uh, sometimes this can be a bit confusing. Um, you might have an amazing employee, someone who's been with you a long time. They're incredible. They're honest. They're loyal. They're kind with everyone. Everyone loves them in the business. They might be exactly the kind of person you want in your business. They're, they're, they're really who you love to come and see and work with every day, but that doesn't automatically make them a key person. For example, maybe you have a part-time or a temporary staff member who's been with the company for 1 year. They're only earning minimum wage or slightly above or relatively lower wage. They perform very non-technical work, things that could be replaced by someone in the open market fairly quickly. It would be difficult to make a case to have that person be a key individual. It doesn't mean that they're not valuable. Of course, they're valuable to your business. You, you love this individual. You love working with them. What we're talking about is the insurance company's view on the loss to your business. That's what matters. So sometimes it can feel a little bit gray. Now, can the business prove that if we lost this person, that there would be a major financial disruption? I mean, that's ultimately what you need to be able to do. And it's— you're not proving how valuable the person is to the business, although those things help. Like, that also is beneficial. I would certainly put that in a cover letter with the insurance company. But we're going to go back to our construction company. So let's say you have a first-year, second-year, maybe even a third-year apprentice. They're electricians. Okay, I have electrical background.. They're learning the trade. They're good people. They show up on time. They're building their skills. They're starting to take more responsibility, but they're not even a journeyman yet. They're not running a job. They're not a foreman. Uh, they're not a superintendent and they're not even, they're not managing a major client relationship. They're not bringing in new revenue. Um, they're, they're, they're an apprentice and they're great at it and they're amazing. You got high hopes for them, but they're not running a multimillion dollar job site. So would an apprentice qualify as a key person? Probably not. Now, doesn't mean they're not important to the business. It doesn't mean they don't have a bright future. It also doesn't mean that they couldn't someday qualify, but right out the gate, probabilities would be hard to make a business case to insure that individual. You— there might be extreme circumstances where it would make sense, you know, but in general, it's not really the right example. Let's go another example. Let's look at the restaurant industry. So you have a bartender, a waiter, a head chef. Okay, these are a couple of different, uh, parties involved in that. If you have a waiter, that again might be a great person, customers like them, they do a great job. Are they key? I don't know, depends. Does, does the business depend on them in some way? What about a bartender? Most cases, probably not, unless they've got, let's say, a customized drink that they make that everyone comes to, that's their claim to fame. Maybe they've got a signature cocktail menu and people come specifically for that on Friday nights. Could you make a business case? I don't know. It might be possible. It's a bit of a stretch, but there's an example there. Maybe they've been there for 25 years. They deal with regular customers. They've become part of your brand. There might be a way to defend a case like that. Another example is the head chef. Well, the head chef, if you had to headhunt this person, you had to pay them a signing bonus of $50,000 or $100,000 just to bring them into your business. They've won awards. They've been featured in the media, local media. Their face is in your marketing. It's on the menu. It's on the billboard. Your restaurant's reputation is tied to that individual and having a high-quality chef bringing people in to eat. Now we're talking about someone who might be a key person. If that person suddenly dies in a Jaws-style shark accident, well, what happens? You know, you're not just replacing a salary. You need to recruit immediately because you have people coming in next week. You might have to pay a big signing bonus to get someone. You might have to hire them and recruit them from another restaurant. You might have to redesign the menu, reprint menus, change your entire marketing, reassure customers. You got to get that person to gel with all your staff. You got to keep reservations for your restaurant from falling off to protect the business's reputation. Now, 5 to 10 times that chef's income might make sense on what we need to replace because the business loss isn't just the income replacement, it's all the operational disruption, reputation, certainly revenue, customer confidence. Those things compound over time. The financial energy of that business is completely interrupted if that shark attack happens and we lose that head chef. So that's a much more distinct example. Okay, so now how does an underwriter look at this? I think this is like ultimately getting back to JJ's question. And looking at that coverage, we would want to look at how does the underwriter look at it for the business side? And then what's the difference between the business side and the personal side? Pretty simple. The personal side has got to do with your economic value to your family and the loss if you were to go personally. For the business, it's all about what the loss is to the business that we can demonstrate. And it'll vary by insurance carrier a little bit, but in premise, all things are kind of general and it's going to be based on the type of policy sometimes, the amount of coverage. What are the financials of the business, the specific role of that person being insured? A lot is going to tie to the income that the insured person makes, the key person. So often you might see a range of somewhere between 3 times and 10 times the income of that key person. In some cases, it could be higher, like if they're, again, a founder or a partner or something like that. Again, really high revenue impact. We could certainly address and run a business case for a higher need.. But a good kind of standard is like a 3 to 10x of the person's income relative to what they do. Okay. So every insurance company has a financial underwriting guide that'll kind of isolate that. Most, most insurance companies will look at probably in that 5x range and certainly up to 10. But again, if you're going up to 10 or above, we need to defend what that rationale is. That's going to be really important. Okay. Determines from the underwriter if they're comfortable with which number. Is it 3x? Is it 5x? Is it 10x? A number of different things. First, how clearly is that person key? How much revenue do they influence? Uh, how difficult are they to replace? So that gets into that technical knowledge, the understanding that they have, those relationships, how difficult. And a fourth thing would be, what would it cost to recruit and train a replacement for your business? And then the fifth thing that would be how long would the disruption last? Sixth element would be what documentation are you providing that's supporting everything you just said? And if we were to look at the seventh item is how well would you explain the case as the advisor? So this is where a cover letter that an advisor puts together makes a lot of sense. I do a lot of COVID letters. So the more you can explain the circumstance to the underwriter, the better they can understand the story. If you just send an application in and kind of hope it all works out, it's, it's, you're going to run into some issues. Okay, so all of these things matter, and then that's how you can defend and build a case around it for the business. So there's actually a ton of work, but it's good work because we're talking about solving a major economic problem. Now, once the insurance is in place, if you've got a policy, maybe you just need basic term insurance for now. That's fine. That solves the immediate need. But you might also, if you're an advocate of things like cash value and par whole life, you could get a par whole life policy and maybe add a term rider on it. So you're supporting the whole coverage, but you're also building an asset underneath. Okay, that asset could cause a lot of additional value because the business owner owns it and the key employee doesn't own it. But maybe you use it to help fund future bonuses or other things that you need the business to do, and you're building a cash reservoir at the same time. And that policy just becomes one more policy in the mix of what you're building. All right. So another thing that's important, the key person has to consent to the thing that's going on and they need to be insurable. So we've, we've identified the business's need and the financial element. Now we have to look at the individual. Who's the insured body? Who's the body? Do they, do they look as good on the inside as they do on the outside? Okay. That's, that's the key thing the insurance company needs to understand. And so could there be a rating? Could there be an issue? There's age, all these requirements, smoking status, their, their personal habits, like around health, like do they, do they do whatever? Drugs of some kind? Like, do they do marijuana? Like, what are these things that are happening that could have some potential adverse effect on the, uh, the impact? So those are key things that happen. All right, so you establish the interest financially, you make an application, the person's got to be healthy and approved, and then boom, you got a policy mix. The policy design and type is really where you get to have the creative control as the business owner about what you want. So you want to solve the need, Boom, we use insurance to do that. You want to solve the need for financing in your business, like becoming your own banker? Well, maybe you already know how much capital you want to deploy, and now we can combine this objective and this thing into one mix. That's what gets really, really exciting. Okay, farmers, business owners, look, stop letting banks control your growth. Our book, Growing Your Own Capital, shows you how to finance equipment, land, inventory, and the expansion of your own family system. Get a free digital copy at growyourowncapital.com. That's growyourowncapital.com. So the next question we want to address is what happens if that key person leaves? Well, you— once you've established a policy and it's legitimately established, that contract is enforced. So if that person left, you know, 40 days later because they took another position or a job, that policy is still enforced on that individual's life. So, if they retire, they resign, they get fired, they move on to some other— well, the grass is always greener on the other side. Sometimes they're greener pastures, sometimes they're browner pastures, if you know what that means. We've all seen that, I think, to some degree. What happens to the policy? Well, the policy is still there. The business still owns that. It's on that person's life. It doesn't disappear because an insurable interest needs to be established at the time that the contract is put in place. So, as long as the business maintains that policy, Eventually that person will no longer be with us. We'll be talking about them in the past tense. And so there will be a claim paid. You would just need to have an idea on when that happens to be able to claim on it, essentially. Okay, so, uh, the corporation in this case, or maybe you're self-employed, or maybe it's an S corp, like whatever the style of corporation is, uh, can continue owning and controlling that person on that person's life as long as they want. They may choose to get rid of it if they want. If it's just term insurance, maybe they don't want to pay for the cost. And they want to redirect that on a new hire. But if it's a cash value policy, you would likely want to keep that policy. You can use its collateral value. You have access to policy loans. It's going to keep growing depending on how it's built and structured. If you're, if you're implementing the process of becoming your own banker and you're working with a qualified person, an authorized practitioner who's helped you build and design this, by all means, you would want to maintain that asset because that's an asset that supports your business initiatives and some of your long-term benicios even beyond that. Okay, and you never know when that death claim is going to come in that could support the ongoing business needs as well. So a lot of great opportunity that's there. All right, you want proper documentation, you want clear consent, a clear business purpose, you want proper corporate ownership identified. So working with an advisor to help figure that out, potentially with the accountant, potentially with your legal team. So you're going to need several heads, a team involved The insurance person is going to kind of run point and highlight key areas, and then you'll need to go get legal confirmation, accounting confirmation about the right way to have that ownership structure in place. And that's going to vary a little bit by jurisdiction and somewhat by the nature of your business as well. Okay, so does it affect the insurance, uh, person's— the, the individual person who's insured, the key person, their personal insurability? The answer is it does not. Um, at least it should not in general. There could be certain circumstances, but Mostly across the board, it does not. Okay, the business policy justifies a business loss. Personal policy justifies the individual's personal human life value. That sounds kind of really cryptic and stupid, but that's what they call it, HLV, or human life value. Now we're going to have another video, we're going to talk about that specifically, going to unpack that a little bit more for everybody. But the underwriter would still look at the whole picture. They might want to know if that person does have their existing individual coverage. So it could play a role. All the information is helpful. You want to provide as much information as you can to the underwriter. But at the end of the day, the business need has to satisfy and justify its own. So here's another example. So imagine we've got Sarah. She earns $100,000 a year. She's been identified clearly as a key person in a business. The business applies for $500,000 of key person coverage. That's 5 times, right, her income. The business, and that's the gross income. So Sarah maybe earns less because of taxes or whatever, but that's the gross. The business explains that Sarah manages the company's largest client relationship. She can control some supplier negotiations, probably could take 6 to 12 months to replace her if something happened. The policy is approved, the business own it. Now Sarah, she wants to go and get policy for himself, for herself. She wants to protect her children. She has a mortgage. Maybe she learned from our videos. She wants to practice the infinite banking concept. She wants to start doing that. So she goes and applies separately. Could be a different company, different person supporting her, etc. The underwriter might see that there's a business owner coverage if it's declared, but it really doesn't matter because Sarah doesn't own that other policy. Sarah is looking to buy one for herself that she owns, so she doesn't own other death benefit on herself. When you're looking at applying from a personal standpoint, they're looking at, okay, all the different policies that you might have. If we added up the sum of all of that death benefit, all right, plus the one you're applying for, we have a total, uh, insurability line. And is that number in relationship to your total income sensible? So wherever you are, you're on the age timeline, okay, there's an age timeline where you get a multiplier of your income, and the income number really is what determines ultimately your human life value. And once you exceed that number, we have to start to defend and explain why that extra coverage is necessary. So fundamentally, the death benefit has to have merit. It has to have a reasonable business sense about the loss that we're trying to solve for. Okay. So now we're going to get into a real case study here. And this is a great example I want to talk about because I think it makes, uh, when you see real examples, it really helps you understand. And this story comes from Jeff, it's Jeff Moses, and the company is Auto Custom Carpets. It's a real-world story. And because it happened, it happened in the United States, this isn't an Infinite Banking story, this is just a general key person story. And there's an organization that provides a lot of nonprofit information about insurance contracts. I'll link to it down below. But here's basically the key story. So Jeff Moses, he was the president and one of the 3 partners in this business. All right. He was on his way home from a business trip when a small plane, I don't know if it's a Cessna, I can't remember what size of plane it was. It crashed near Talladega, Alabama. Okay. There were no survivors. Now, Jeff, he wasn't just another name on the payroll. The guy was the bigwig. He was the president. He was a co-owner of the business. He was also part of the sales leadership. So he was key in not just his position, but in actually what he did. He had unique product knowledge, industry experience, tons of relationships, massive influence inside of the business. So according to the story, the accident wiped out most of the company's sales force, and the future of the whole business, Auto Custom Carpets, and its 150 employees depended on the remaining partners quickly finding and recruiting a qualified replacement to replace Jeff before all the capital dried up. Thankfully, the company had planned ahead. They had key person insurance on the lives of all 3 partners. Okay, so the proceeds from the policy allowed the business to recruit a very experienced salesperson, actually from a competitor. Within about 30 days, the business was back operating pretty much at full speed. This is exactly what a key person insurance policy is designed to do. It doesn't remove the tragedy, okay? It doesn't take away any of the sadness and the emotional context, It doesn't replace the human or the person. It does not take away the emotional loss, but it provides money and liquidity at a moment when the business is the most vulnerable, when it's on life support. And sometimes that money is the difference between surviving and all the employees losing their jobs, et cetera, and the families being decimated because of it, or collapsing, or thriving and being able to stand tall. Okay. Here's the key reality. Businesses are systems. In every system, there are pressure points. Okay? There are people who hold pieces of the system together. Sometimes the business owner knows exactly who those people are. Usually you have a pretty good intuitive sense. Sometimes they have to really think about it because it's not something they considered. They're too busy just running the business. Here's some questions that you really need to start asking. So write these down. Who drives revenue? Who owns any key client relationships? Who manages the largest projects that I've got going on in the business? Who else has technical knowledge that nobody else in the business has? Who keeps my lenders and my suppliers confident? All right, who would it take me 12 to 24 months to properly replace or replace and train? All right, because training cost is very real. What would cause chaos? Who would cause chaos if they left and they're suddenly gone? All right. Um, what would make— who would make my employees or my customers nervous or investors nervous if they were no longer in the business? Those are the people who stand up as your key individuals you want to start considering insuring. All right. If the answer is nobody, that's also good to know. It means that you maybe either have a more resilient system because you've built processes in place you've got documented procedures, or your business isn't big enough, or you just don't have a business structure like that, in which case it's probably just you as the business owner and maybe a partner that you need to consider. All right. So that's how you really start to determine what you need to do. Now, this is one of those silent risks. It sits in the background of every business. Everything feels fine until one day it isn't. It isn't like, you know, the fire— there was no fire and then all of a sudden there was a fire. The business is scrambling and it's not the best time to go looking for liquidity. Banks don't want to lend you money when you need it to make the business survive because the key person is gone and now they don't want to give it to you. So when everyone needs money, it's always the hardest to get at unless you have proper things in place like good insurance. So where does infinite banking fit into all this? In my opinion, we want to address that a little bit tight. And I've given you a couple examples, but this is where your need from the tool and the process, the tool being insurance and the process of banking. Key Insurance is just insurance. It has a purpose. Infinite Banking is a process of using a well-structured participating whole life policy as part of a broader capital system. All right, so the business needs protection. Cool, we know that there's a risk there. We got to ensure certain people. We're going to do that anyway if we use the right structure of insurance. And because the business also needs capital, it has high capital demands, and we need to store money at various times when it builds up and then it draws down, builds up, draws down, we need a storage facility. That's where these par whole life policies can come into play. And we can combine the key person and the policy structure to build something that allows that storage facility to exist so that when you need capital for expansion, for a new hire, for a bonus, for different things, you have a place to tap into it and you can work with that reservoir as you see fit. That is all about control. Where is the company's long-term warehouse of capital going to reside? It must reside somewhere. There's no better place to have it reside, in my opinion, than here. Okay. So instead of just asking what happens if this person dies, we should be asking, where is my business going to warehouse capital? Who's going to control the liquidity to that capital? And are we building an asset at the same time as we're protecting the business? And is there any disadvantage to doing both of those things at the same time? All right. These are really good questions that you need to be asking. Now, you can solve the key person thing with just term insurance that's designed— it's going to be inexpensive, but it's also only going to solve it for a period of time and it's not going to help you build a capital reservoir. So you still need a capital reservoir. You still have business demands. So there's a sensible reason to look at combining these two things together. In a good structured conversation with an advisor who understands, essentially. Hey, if you're getting value from this and you haven't subscribed yet, hit the subscribe button right now. Look, we're marching towards 10,000 subscribers and every single one helps us bring more powerful content on taking control of your money. All right. So if we're going to put this all together, all right, bring it back to JJ's question. Does a key person insurance affect the personal insurability? The answer is no, generally no. There might be unique circumstances that I'm not familiar with, so I'm not going to absolutely outrule it. But in general, it doesn't have an issue because it's the business need versus the personal person's need and that human life value calculation because it addresses that individual's needs and who the ownership is versus on this side of the equation. All right. If the person has maxed out their human life value on the personal side, and the business needs insurance, well, the business should still be able to get insurance because they're paying for it for their demonstrated need, even though that person has maxed out their human life value on their personal side. So it kind of goes both directions. All right, uh, so what else? Again, person's got to be insurable, they have to provide consent, the amount's got to be reasonable for the insurance company to do it. Probability is you're going to need a cover letter and documentation in order to tell a story as to why All right. And we also talked about who is likely not going to be a fit. We give several examples of who is the right type of individual who would be demonstrated as a key person. And that should give you a really rounded view as to how you should do this. Now, if you're the business owner, you're the founder or a major partner, you should be getting insurance in place and a buy-sell arrangement. While we talked about the key person, we only briefly touched on the buy-sell element, but the key idea of a buy-sell arrangement is that if we lose somebody, again, we have that shark attack. We're talking about like our case study for the carpet business where Jeff Moses died in a plane crash. Well, not only was a key person, he was a founder, but his family has the right to go on living. And so his share value of the business is worth something and that needs to get valued. Well, what happens is if the insurance comes into the business and they have a large sum of capital, They don't have to now have the spouse who's grieving and their family set on, you know, come sit at the board seat and start determining and navigating the rules of the business and trying to dismantle the business. They want the business to keep moving. So they have the capital, they value the shares, and they can pay out the share value. So it's a buy-sell arrangement. We're buying out your value. You're selling your shares at the same time. We're buying you out. And your family gets to go off, you know, down the next path of life, handle the grieving process that you need to, but they get to continue on living and they get the appropriate value for the shares of the business that their deceased individual helped build and construct. That is a very powerful process. So key person and buy-sell can sometimes go hand in hand a little bit. I mean, they're not necessarily one and the same, but there's definitely an overlap between them.. And it's really important to recognize what that value is. Every business should have insurance on the key person. It really does matter. Should every business be incorporating the Infinite Banking Concept? Maybe. Only you can decide that. That's really up to you to figure out. So there you go. A lot we covered today, a lot we unpacked. Ultimately, as a business owner, do you have buy-sell arrangement? Do you have key person insurance on anyone? Leave a comment below. Let us know how that's worked out for you. What were some of the reasons that you needed to insure a key person, and, uh, why would you consider doing it in the future? It's important, and that's the kind of discussion we want to have here. Now you're going to see another video that just popped up. You should definitely click on that. More great content awaits.