Life insurance programs “Golden Handcuffs” and “Golden Parachute”
“Golden handcuffs” and “Golden Parachute” are the names of insurance products that help make the relationship between the owner and the top manager more pleasant.
Both policies, in fact, are endowment life insurance programs. Their main difference is in the mechanism of motivation of top managers, depending on the needs of the company.
If the top priority is to keep the top manager, the Golden Handcuffs are the best fit here. In this case, the owners of the company provide insurance guarantees to the hired manager in such a way that the funds accumulated with the help of insurance are transferred to him only after the end of a certain period of work in the company or the completion of the tasks assigned to him. For example, an employer can set a condition for a hired top manager: if you work for 10 years, you will receive $ 1 million under the policy. If the top quits ahead of time, he will lose these funds.
Golden handcuffs are also used to restrain ordinary employees. But if for them the sum insured often does not exceed the size of a three-year income, then insurers make an exception for the tops.
On average, the sum insured ranges from $350,000 to $1 million. But there may be more.
Insurers explain this by the fact that top management is, as a rule, highly qualified specialists who are ready to be lured by competitors with pleasure. Therefore, to keep them, the owners of companies go to various tricks, including life insurance with large sums insured.
If the insurance did not work, and the top manager decided to leave, the task of the owners is not to allow him to defect to competitors. The Golden Parachute policy helps to cope with this problem.
In fact, it is no different from the Golden Handcuffs (the same endowment insurance policy with an increased payout amount). But at the same time, the following conditions are prescribed in the employment contract: the top manager receives insurance at the exit and undertakes not to hold managerial positions in similar companies for 1-2 years. Such a trick helps employers protect themselves from the undesirable actions of a dismissed employee, who, having quite extensive information about the company, can seriously harm it if he goes to work for competitors.
In European practice, the Golden Parachute is insurance in case of job loss. Such a type of risk as the dismissal or reduction of an employee is not provided for by law. Therefore, the scheme for obtaining insurance under the Golden Parachute is more complicated than abroad.
According to the agreement between the company and the insurer, if the manager worked for the entire term of the policy and did not quit, then, as a rule, the insurance is not activated and it is not he who receives the compensation, but the owners of the company.
If the top manager was fired, then the company gives him the policy, and the amount of compensation will already depend on the position of employers. Some may provide in the contract with the insurer for further payments to the account of the dismissed employee (before the expiration of the insurance contract), while others transfer the policy to the category of already paid. In this case, the top will receive an insurance amount at the output that is less than it was originally envisaged.
