Page 20 - Life Assurance
P. 20
Both methods reveal clearly that a human life is
much more valuable economically than many
realize, and that this value exceeds the amount for
which life is commonly insured.

2/4/4 Loss-to-Business Approach:

A business firm has a more difficult task in
determining the life value of :

- A key employee,
- A partner, or important stockholder in a
closely held corporation.

If a key person dies, the firm may lose
valuable customers. The extra cost of training or
hiring a replacement may be substantial. Key
employees may be lost because of the death of a
partner or an officer with whom they were
closely associated. Each firm must take the best
estimates it can of the loss exposure and insure
accordingly.

Another source of loss to business when a
partner or a stockholder dies if this person's
ownership in the business may pass to persons
unfriendly to the firm, or may even result in
liquidation of the firm in order to pay estate
obligations. Competitors may obtain controlling
ownership of the firm by purchasing shares from

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