Key Man insurance

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What is Key Man insurance?

Key Man insurance helps safeguard a business against the financial effects of death, terminal illness, or critical illness (if chosen) of a key person. 

The loss of a key person may result in reduced sales, loss of profit/turnover, wasted time, recruitment costs, and the disruption of development plans or increased workloads for the remaining staff. 

Who is a 'key person'?

A key person is an employee whose death or continued absence would affect the profits of the business. Key people are individuals whose skills, knowledge, experience or leadership are important to a business' continued financial success.

Importantly remember that a Key Person is not necessarily a director, but someone who is key in helping the firm achieve sustained profit. Examples of a key person include, but are not limited to: 

  • Sales director
  • Salesman
  • IT specialist
  • Managing director
  • Head of product development
  • Technicians and R&D personnel 

How does it work?

Key Man insurance is life assurance or life assurance and critical illness cover (if chosen) written on the life of the key person but owned by the business so that any money due becomes payable to the employer. The business pays the premiums. This applies to both Limited Companies and Limited Liability Partnerships. With a partnership, the policy is written on an own life basis and may be placed in trust for the benefit of the other partners. 

If your client's business has an individual or individuals who are fundamental to its success, you should consider recommending Key Man insurance. Please contact us for any advice or help required in this area.


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