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Key Person Insurance

Protect your business and key employees

Many businesses find that certain key individuals are responsible for a significant proportion of their profits. Losing one of them can have a serious impact on the health of the business.

Business Meeting at Small Table

We offer many products, depending on what you want to accomplish.

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The Important Stuff.

  • Who is a key person?
    A key person is an individual whose skill, knowledge, experience or leadership contributes to the continued financial success of the business. In fact, it could be ANYONE whose death could lead to a financial loss for the business through: » Loss of profits. » Having to recruit or train a replacement. » Important personal or business contracts lost due to the key person not being there to maintain a contract. » Loss of goodwill which could have a direct effect when it comes to raising capital for the business or attracting new investors. » Customers and suppliers losing confidence
  • Do I need to prove someone is a key person?
    It’s pretty straightforward, as long as you can reasonably show that the business stands to suffer a financial loss of profits as a result of the death, terminal or critical illness (if chosen) of that employee. They are classed as a key employee.
  • What if the key person leaves/retires?
    If a key person were to leave or retire before the end of the key person protection policy term, the business could do one of the following: » Stop paying the premiums and the policy would then lapse. » Continue paying the premiums until the end of the policy term and, in event of a claim, the business would receive a capital sum. » Assign the policy to the key person who would then become the legal owner of the policy and could continue paying the premiums. Where a partner is a key person and the policy is written in trust, the policy would automatically revert to the key person.
  • Why use a trust for a partnership?
    A partnership in England, Wales and Northern Ireland cannot be the owner of a policy because it does not have a separate legal identity. If the key person is one of the partners, that partner could take out their own life plan, and write it in trust, at outset, for the other partners. We have in-house trust experts to guide you through the process. The taxation of this can be complicated, for both the company and the life insured. National Insurance and Capital Gains tax may also need to be considered. Our advisers can help by providing specialist advice on this.
  • Are the premiums tax deductible?
    If an employer insures their business against loss of profits due to the death, critical illness, accident or injury of an employee, director or another key person, the premiums may be tax-deductible if: » The sole purpose of the insurance policy is to meet a loss of trading income from the loss of that key person, and not a capital loss to the business » If the insurance is a term insurance policy providing cover against the risk of one or more key lives within the term of the policy, and no other benefits. It’s also important that the insurance term should not exceed the key employee’s usefulness to a company

There is always a solution.

Did you know? 

50% of small businesses fail within the first five years of
operation? Of those that fail, 42% cite the unexpected loss of a key person as
the primary reason*.

But there’s a solution - with Key Person cover, you can mitigate the impact of
their absence. If the key person were to die or suffer from a severe illness, the policy pays a cash lump sum to make up for any loss in revenue or profits,
thereby keeping the business on track.

What can I use the payout for?

With this insurance, any overdrafts and loan repayments are covered. It guarantees the repayment of loans (depending on the cover you choose) in the event of the death of a key person. Having this in place will limit the wider impact on the business to prevent closure.

You might not want to think about replacing someone under such circumstances, especially not immediately after, but the reality is you have to continue doing business. This involves finding someone new to be a part of that. Key Person Insurance will cover the cost of a new employee, as well as the process of advertising and interviewing candidates.

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Protecting your finances

If losing a key person or you means lost profits, Key Person cover will help cover those costs until you’ve recovered. It can be used to pay for wages, replacement staff and even loan repayments owed by the business. This will help keep your business afloat during a difficult period.

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Employee benefit

You can use some of the lump sum received to support your employee during their illness - this makes for an excellent employee benefit.

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Paying off any outstanding debts

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Covering recruitment costs

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Future-proofing your business

Going through something so difficult as a business as the loss of a key employee could have a huge effect on your staff - particularly the future of the business. With Key Person Insurance taking care of the money side of things, employees can at least be more reassured that the business’ financial future is secure and their own jobs aren’t immediately at risk.

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Taking care of the key person’s family

It can also provide financial protection for the key person’s family in the event of their death or incapacitation.

We offer many products, depending on what you want to accomplish.

Thank you our experts will be in contact in 24 hours

Did you know?

1 In 4

UK companies would close immediately after losing a key person

- According to L&G research

Why consider Key Person Insurance?

The loss of a crucial team member can have a significant impact on your business. Without a protection plan in place, your company may struggle with immediate cash flow issues, reduced income, and the need to hire and train a replacement, which can be costly and time-consuming. Key Person Insurance is vital to safeguard your business and ensure it can continue operating smoothly even in the absence of key personnel.

For example

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1. TechCo, a small tech startup, heavily relies on its CTO, Alex, who is a key person in the company.

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2. When Alex becomes seriously ill and unable to work, TechCo faces challenges in product development and experiences declining revenue.

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3. Without Key Person Insurance for Alex, TechCo struggles to cover immediate cash flow needs and faces additional costs to hire a temporary replacement.

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4. Key Person Insurance would have provided financial protection, enabling TechCo to smoothly navigate the absence of Alex and continue business operations effectively.

Calculating the value of your key person

Ask yourself the following:

» How much revenue does your key person generate?


» Would your business loans be impacted if your key person were to be suddenly absent due to serious illness or death?


» Would the business suffer a loss of vision?


» Does your business have sufficient cash reserves to cover any loss of income?


» Can you afford to recruit for a replacement straight away?


» Without insurance, how confident would your lenders or investors be?


» What would be the impact on the rest of your team? Would morale dip and who could provide the same level of knowledge as your key person?


» Would any of your customer/supplier relationships be effected?

Check Out The Benefits Our Clients Recieve

Are you a team of one?

The lump sum payment your company will receive from the key person cover will allow you time off work to recuperate without the need to worry about money.

 

You’ll continue to trade, cover your mortgage, household bills or make alterations to your home or lifestyle to allow you to adjust.

 

This plan also safeguards any savings you have
accumulated over the years (and paid tax on!).

We are trusted.

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