Key Person Cover

Feb 2, 2023

Owning a business can be great, especially if -like me- you have a family to care and provide for. It allows you to give them security and stability which, as a dad, that’s all we want to do for our children. To provide for them and give them the best opportunities in life. But what would happen to your business if something happened to a key employee? How would this affect yours and your family’s livelihood?

Of course, every business faces risks. But long-term illness or death of a key employee is one risk that could have drastic consequences on your company’s future performance- or even its existence. This can have a huge domino effect on you, your employees and everyone involved.

If you’re the owner of a business, then you are likely to be a key person. It’s crucial to think about what would happen to your company if yourself or your business partner were to become incapacitated. This is why Key Person insurance is so important.

Who is a Key Person?

A Key Person is usually an owner or director of a company. However, anyone of high importance or who is essential to the operation of the business can be classed as a Key Person. A Key Person is someone who, without them, the business could fall apart.

What is Key Person Cover?

Key Person (formerly Key Man) Cover is a life or disability insurance policy. It protects your business, paying out a lump sum if a person of importance should suddenly become unable to work due to illness or death. This policy can cover owners, directors, managers or any employees who are essential to the running of the business.

The insurance payout can be used by the company in various ways – such as, to pay off debts, continue operating or to wind up operations if they can no longer continue.

Key Person Cover can also help with:

Loss of revenue
Recruiting/training a replacement
Loss of customer and supplier confidence
The loss of business contacts
Outstanding loans or money owed
Inability to raise capital or attract new investors due to loss of goodwill

What are the different types of Key Person Insurance?

There are two types of insurance that you can get to protect your business. They are:

Key Person Life Insurance

This cover offers protection in the event that a key person dies. This will result in the company getting a lump sum that can be used as the company sees fit.

The amount a company will receive is dependent upon its size, structure and which industry it trades in.

Key Person Critical Illness Cover

If a key person becomes critically or terminally ill due to things like strokes, heart attacks, or cancer, Critical Illness Cover also pays out a lump sum to the company. In addition to these conditions, it can also cover things such as physical incapacitations.

Both types of cover can offer essential protection in such circumstances.

If you’re a business owner who relies on your company for yours and your family’s livelihood, then Key Person Insurance is something you may want to consider. If you’d like to know more about how it can benefit you, then don’t hesitate to reach out to me.

by | Feb 2, 2023

The information contained was correct at the time of publication but is subject to change

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