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Key Person
Protection Insurance

 

Protect your business against the impact
of critical illness, terminal illness or death of
your most integral employees.

Key Person Insurance

 

Talented, devoted, and capable individuals are at the core of every successful organisation, but none of us can predict what the future will hold. Research from Legal & General found that 52% of small businesses think they would have to cease operations in less than a year following the passing away or serious illness of a key individual.

 

A key person’s death, terminal sickness (if the life expectancy is less than 12 months), or a specific critical illness (if chosen for an additional cost at the commencement) can have a significant financial impact on a company. Our Key Person Protection helps protect against this risk.

 

To help replace the key employee and help cover any profit loss, the business receives a direct payment from the policy profits. The insurance proceeds can enable your company to keep operating.

What is Key Person Insurance

 

The terms “key man insurance” and “key person insurance” refer to insurance plans that shield companies from losing important employees, including men and women, who are unable to work due to serious or terminal illnesses or who pass away during the term of a policy.

 

Simply put, “key man insurance” refers to a business’s insurance against the financial loss it would sustain in such a scenario. Giving your stakeholders the assurance that your company can continue to run smoothly even if a key employee passes away or develops a specific serious illness is the goal.

Who is a Key Person

 

Any individual who is essential to the daily operations of your business, such as a director, an employee, or someone whose ability, expertise, or experience has an impact on revenue, might be considered a key person. Or, to put it another way, what responsibilities might a key person have?

 

Take into account, for instance, whether any loans or financial obligations are dependent on that person, whether their loss will affect sales, and whether their absence would have an influence on future plans.

key person protection insurance

Who Can Take Out Key Person Insurance

 

With the consent of the individual who will be covered, you can purchase key person insurance if you own a business, such as if you’re a director of a limited company. You will need to have a financial relationship with that person.

When Should You Take Out Key Person Insurance

 

There is no right or wrong moment to get a key man or key woman life insurance policy if your firm is expanding. A start-up business may be dependent on one or two key employees who are essential to the company’s success, whereas a larger organisation may have more resources and the flexibility to replace key employees with other employees.

 

However, established businesses have more overheads, thus the effects on the company could be severe if the loss of one employee has an impact on sales. Key person insurance can give your company a safety net, albeit every organisation is unique.

Why Should I Consider Key Person Insurance

 

Whilst it’s never pleasant to consider the worst-case situations, the sad truth is that the loss of a key employee in your company could have a significant impact. Any organisation could suffer greatly when a key team member is gone, with decreased sales and earnings and increased responsibilities for the remaining employees.

 

One strategy to protect your company from the passing away, a terminal sickness, or a critical illness of a key employee in your organisation is to implement key person protection. When a key insured person passes away within the term of the policy, it is intended to pay out a lump amount to assist make up for the loss of that person’s talent, expertise, experience, or leadership.

 

The revenues could be used to restore lost revenue or to identify and hire a replacement, for example, which would greatly aid the company’s recovery.

Who in my Company Will Need Key Person Cover

 

Key Person Protection can apply to any individual deemed to be critical to your business, but to help you think of your company’s needs, here are some roles that are typically covered by key person insurance:

 

OWNER / CEO / OPERATIONS MANAGER / IT MANAGER

Owner/Founder CEO Operations Manager IT Manager
Web Developer Sales Lead Employees with lots of contacts Exceptional Talents

Key Person Insurance Explained

How Does Key Person Protection Work

 

Key Person Protection is 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, so any pay-out is payable to the employer.

 

If you’re taking out Key Person Protection to cover a key man or woman in your company, you can make a claim during the length of the policy in the following circumstances:

 

  • 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)

You will need to be able to demonstrate that your business would suffer a financial loss of profits in the key person’s absence to insure them as a key person.

What Does Key Person Protection Help Protect

 

A payout from the policy after the loss of a key person could help with 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.

  • Outstanding loans.

Speak To A Qualified Financial Advisor

Our team of expert financial advisors at Life Expert are on-hand to offer professional advice & answer any questions you may have about business protection insurance. Get a free quote for all things to do with business protection insurance today & protect your business.