Friday, July 13, 2007

Severance Insurance

The traditional funding protocol for severance is pretty simple. The company writes the displaced employee a check in exchange for receiving a signed general release and waiver.
Now there is an insurance policy that corporations can buy to cover their expenses related to severance and the word is that it not only smooths demand on free cash flow but also saves the corporation big bucks.

So if that's the case, there must be enough financial leverage inside the policy to pay a return to the insurance company, its broker, deliver savings to the corporation and also pay the corporation's severance obligations. Why couldn't that financial horsepower be shared and advantage both the displaced employee and the corporation?

This whole idea of severance insurance is a whole lot like short and long term disability. All provide salary protection because of an involuntary loss of income; non-causal loss of job v. an accident, injury or illness.

The only question is why has it taken so long for severance insurance to be offered?


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