Key Person Insurance is a business protection policy that provides a financial payout if a critical employee—such as a founder, executive, or specialist—suffers death, permanent disability, or a serious illness. This payout helps mitigate the financial impact of losing a key contributor.

Any business that relies on the skills, experience, or leadership of one or more individuals should consider key person insurance. It is particularly valuable for companies where the loss of a key team member could disrupt operations, revenue streams, or strategic direction.

This insurance is designed to cover the financial risks associated with losing a key employee due to death, permanent disability, or critical illness. It helps provide funds to cover business expenses, repay debts, or assist in recruiting a suitable replacement.

Coverage is typically based on factors such as the key person’s role, their contribution to revenue, and the potential cost of replacing them. A thorough risk assessment with your adviser will help determine an appropriate coverage level that reflects your business’s unique needs.

Key Person Insurance generally serves two main purposes:

• Revenue Purpose: To provide financial support for operational losses, such as reduced income or additional costs during a disruption.
• Capital Purpose: To safeguard the business’s long-term value by supporting strategic investments or repaying key business obligations.
  Understanding these purposes is essential for aligning your cover with your financial strategy and tax considerations.

The process begins with an assessment of your business’s risk exposure and identification of key roles. After underwriting and policy design, you receive a tailored plan. In the event of a loss, the policy pays out to help cover the financial shortfall, support business continuity, and assist with transition costs.

If a claim is necessary, the process involves notifying your insurer and submitting relevant documentation, such as medical reports and financial impact assessments. Our advisers will guide you step-by-step to ensure the process is as smooth and prompt as possible.

Premiums depend on several factors, including the key person’s age, health, role in the business, and the overall risk profile of your company. Insurer underwriting criteria and the chosen coverage amount will also play a role.

Yes. Policies can be tailored to reflect the specific responsibilities and impact of various key roles within your business. This means your coverage can be adjusted based on the differing levels of risk and importance of each individual.

The tax treatment of key person insurance can vary depending on how the policy is structured. While some policies are arranged for tax efficiency, it’s important to consult with your financial adviser to understand how the cover aligns with your business’s tax obligations.

By providing a financial payout in the event of a key employee’s loss, the policy helps fund transitional costs such as recruiting or training a replacement, covering lost revenue, or servicing existing business loans. This financial support can be critical to maintaining stability during challenging times.

In some cases, lenders view key person insurance as an additional layer of security. The policy’s payout can be used to cover loan repayments or other financial obligations, but it’s essential to review specific lender requirements with your adviser.

Regular reviews are important—typically annually or whenever there is a significant change in your business structure or key roles. This ensures that your coverage remains relevant and adequate as your business evolves.

Common requirements include detailed information about the key person’s role, financial impact assessments, business financials, and medical information. These documents help insurers assess the risk and tailor your policy appropriately.

The approval process can vary based on the complexity of your business and the underwriting criteria of the insurer. Generally, the process may take several weeks from application to policy issuance.

Exclusions can vary by policy but often include pre-existing conditions or high-risk activities. It is important to review the terms with your adviser to fully understand any limitations or exclusions that might apply.

Key person insurance specifically targets the financial risks associated with the loss of an essential employee, whereas other business insurances may cover broader operational risks. This specialised focus makes it a vital component of risk management for businesses reliant on key individuals.

As your business grows or changes, schedule regular policy reviews with your adviser. Adjustments may be needed to reflect changes in key roles, business revenue, or overall risk exposure, ensuring your coverage remains aligned with your needs.

Insurers typically assess the key person’s role, health, and overall contribution to the business, along with your company’s financial stability. This comprehensive evaluation helps determine both the coverage amount and the premium.