Key Person Insurance is a type of insurance that can protect your business from the loss of key staff. The coverage pays out when an employee dies or becomes unable to work for any reason, and often allows you to hire and train a replacement.
It’s important to have this coverage in place so you are not left without the skills that one person brings to your business.
Any business great or small should consider key person insurance. For example, professional service firms such as law firms, accounting firms, and consulting firms may rely heavily on the expertise and relationships of key partners or managers.
Similarly, startups or small businesses that are heavily dependent on the vision, leadership, or technical skills of a founder or key employee may also benefit from key person insurance.
In addition, businesses that have significant debt or that operate in industries with high fixed costs may be particularly vulnerable to the financial impact of losing a key person. In these cases, key person insurance can provide a safety net and help ensure the long-term viability of the business.
There are several benefits of key person insurance.
Financial protection
Key person insurance provides financial protection to a business in the event that a key employee or owner passes away or becomes disabled. The policy will pay out a lump sum of money to the business to cover expenses related to finding and training a replacement, paying off debts, or compensating for a loss of profits.
Business continuity:
Losing a key employee or owner can be devastating to a business. With key person insurance, the business can continue to operate while a replacement is found and trained.
Peace of mind:
Knowing that the business is protected in the event of a key person’s death or disability can provide peace of mind to the business owner and employees.
Competitive advantage:
Having key person insurance can make a business more attractive to investors, lenders, and potential buyers.
The cost of key person insurance can vary depending on several factors, such as the age and health of the key person, the amount of coverage needed, and the type of policy.
Generally, the cost of key person insurance is based on a percentage of the coverage amount, and the premium payments are made on a regular basis (e.g., monthly, quarterly, or annually).
The percentage rate can range from 1% to 5% of the coverage amount per year, depending on the risk factors involved.
There are a few exclusions and limitations to key person insurance. First, the coverage does not apply if the employee dies due to suicide. Second, it typically does not cover pre-existing conditions.
Third, the coverage limit is usually £500,000 or less. Make sure you are fully protected by talking to an insurance broker about your needs.
Our team of UK life insurance brokers search the entire insurance market and compare the best insurance protection cover quotes to get the best one for your situation and needs.
Key person cover can be flexible and work around you. We review our providers each year to make sure you are getting the best deal for you.
