In a nutshell, Key Person Insurance helps protect a business from the financial effects of a Key Person being diagnosed with a Critical Illness or dying.

Many business owners cite their premises, plant and machinery, vehicles, computer equipment as the business assets they first think of insuring.  They are aware they need to cover the cost of replacement, potential loss of profit and to minimise business disruption.

But what would happen if a key employee, partner, member or owner were to die or become critically ill?  Could be devastating right? 

So how do we define a “Key Person”? 

“someone whose death, critical illness or disability would have a serious impact on the future profits of the business”

There is always at least one key person in any given business, but depending on the business itself, there could be several, and all need to be considered. You may want to ask yourself these questions when considering who is “key”:

• How easily could the business replace their expertise?
• Would their absence impact expansion plans or ongoing projects?
• Would the business risk losing customer orders?
• Would it result in a loss of goodwill or hardening of suppliers’ credit terms?
• Would the business miss their admin or management contribution?
• Are there any loans or overdrafts that depend on them?

How Much Cover?

There are no specific rules here, but there are several tools that can be applied and we can help you with what is most appropriate for your business.  This could be multiple of profit, multiple of salary, proportion of salary roll….clearly there are many options to consider.

What Type of Cover?
There are so many options here and we’ll explore in more detail over time as we add to our knowledge base.  For now though, you can be assured that we’ll talk you through all options, whether that’s to provide lump sum cover or over time, and how to set up the plans is of prime importance and will depend much on the structure of your business, whether it’s a limited company, partnership or whether you’re a sole trader – there are options for all in this regard.