Key Person Insurance
(aka Key Man Insurance)
At the heart of every successful business are talented, dedicated and capable people, but none of us know what the future will bring. Research shows that 59% of businesses believe they would have to stop trading in less than a year after the death or critical illness of a key individual.
A key person insurance policy helps to safeguard your business against the financial impact of death, terminal illness (if the life expectancy is less than 12 months), or a specified critical illness (if chosen for an extra cost at the outset) of a key person.
Policy proceeds are written into trust and paid directly to the business to help replace the key person, and help cover any profit loss. The policy proceeds could be the difference between failure and continued success for the business.
So who is a key person?
A key person could be anyone who is crucial to the day-to-day running and success of your company, such as a director, employee, or anyone whose skill, knowledge and experience affects revenue.
Consider if any loans or financial commitments depend on that person, whether their loss would have an impact on sales, or whether their absence would impact on future planning, for example.
How does it work?
Key Person Insurance is effectively a life insurance policy (with critical illness cover if selected) taken out to cover the life of a key person within your business. The policy is owned and paid for by the employer, and any pay out goes straight to the company.
If you're taking out Key Person Protection to cover a key man, woman or person in your company, you can make a claim during the term of the policy in the following situations:
Death of the individual
Terminal illness (included - this is where life expectancy is less than 12 months)
A specified critical illness (if Critical Illness Cover is chosen at the outset for an extra cost)
Terms & conditions will apply to all applications and claims. You will need to be able to demonstrate that your business would suffer a financial loss of profits in the key person's absence in order to insure them as a key person.
What can it help with?
A payout from the policy after the loss of a key person could help in the following situations:
Loss of profits
Having to recruit or train a replacement
The loss of important personal or business contacts due to the key person not being there to maintain a contract
Loss of goodwill which could have a direct impact on raising capital for the business or attracting new investors
Customers and suppliers losing confidence in the business