Protect Your Business with Key Man Insurance
Key man insurance, also known as key person insurance, is an insurance policy which pays out when a key person in a business is struck down by ill-health or dies.
Key man insurance differs from conventional life or critical illness insurance in that it pays out to the company, not to the individual or the family of the person insured. Key man insurance is used to protect the interests of the company as a business entity, it is a business protection insurance rather than a personal insurance.
The amount of cover under key man or person insurance is often relatively high, as the loss of a top or key executive may mean the company must invest in shoring up the profits of the division the key person was managing, repay a company debt which the key man had personally guaranteed, or buy out the shares of a deceased key person from their family. The needs of the company must be carefully considered, before seeking a key man insurance quote.
Get a key man insurance quote – make a financial advice enquiry or ring freephone 0800 678 5929
Who should be covered by key man or keyperson insurance?
A company’s top executives and division heads, but also key personnel whose work is central to the company’s success, such as the head of product development, a star designer, or a star salesman.
Key man insurance : 3 main types
There are 3 main types of keyman insurance to be considered.
Key man insurance : Profit Protection
A profit protection key man insurance gives the company a cash injection suitable for multiple uses while recruitment or a reorganisation is under way to adapt to the loss of the key man. Unlike the policies that follow below, this keyperson insurance is very flexible, as the money can be used for any purpose.
Key man insurance : Business Loan Protection
Corporate bankers tell us that around half of companies, especially younger companies, have a loan personally guaranteed by a key man, or secured on their property. This type of key man insurance can repay that debt, in the event of the loss of this key employee. This key man or keyperson insurance is more restricted, as its proceeds can only be used for this purpose.
Key man insurance : Ownership Protection
This key man insurance pays out to the remaining partners or directors when the company is permanently deprived of the key man. Its purpose is to buy out the key man’s shares, and it may be used for no other purpose.
When planning keyman insurance or keyperson insurance, it is important to calculate how much cover is required. This can be achieved by taking good keyman insurance advice from an independent financial adviser.
Key man insurance is all about sensible future planning, and preparing for the unexpected. It can give business owners and managers peace of mind, knowing that their company is protected, and leave them to get on with the day to day challenges that operational issues bring.
Would you like to find how your company can benefit from key man insurance? Contact us now online with a financial advice enquiry or ring freephone 0800 678 5929
