Key person insurance (also known as ‘key man insurance’) is an important form of business insurance. In general, it can be described as an insurance policy taken out by a small or medium-sized business to protect that business from potential financial losses that could arise from the death or extended incapacity of the member of the business specified on the policy. The policy’s term does not extend beyond the period of the key person’s usefulness to the business.
The aim is also to help protect the profits and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but provides a fixed monetary sum as specified on the insurance policy upon the insured person either dying or suffering a serious illness as defined in the insurance policy terms and conditions.
An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.
A key person can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skills or knowledge which is especially valuable to the company.
At Asset Management IFA Limited, our approach is simple, combining an honest assessment of your requirements with a clear explanation of all the options available to you. We can help find the best overall solution that gives you the cover you need at the most competitive price. Contact us today on 02380 420 606 to find out more.