What is Key Person Insurance?

If you have certain employees that are intrinsic to the success of your business, it could be beneficial to protect them with Key Person Insurance. This type of insurance allows you to ensure the business survives losing a valuable employee, with financial support to help with whatever the business needs during an uncertain time.

In this section, we’ll talk about:

• What is a Key Person?
• How does Key Person Insurance work?
• How much cover do you need?
• Why do you need Key Person Insurance?.

What is a Key Person?

Without employees, there would be no business. More often than not, it takes a select few employees to drive a business forward and ensure it becomes successful. If you have one or more employees who are crucial to the financial success of the company, you can protect them with Key Person Insurance.

A key person is anyone with valuable skills or knowledge, or someone who brings in large revenue. They might even have great industry connections. Key people in your business don’t have to be a senior employee; it can be anyone, in any role at any level of seniority.

It’s people with these traits that keep a business going. What would happen if they were to pass away?

How does key person insurance work?

Key Person Insurance helps the business to protect its most important members of staff. You can take out Life cover and Critical Illness cover under this kind of protection.

The business sets up the cover and it will be responsible for paying the premiums. The policy will pay out if the key employee passes away or becomes critically ill. The business will receive the pay-out, which will help keep the business financially stable by replacing lost profits or even contributing towards recruitment costs. You never know what the impact of losing a key employee might have, but Key Person Insurance can offer financial stability.

You also have the option to take out Key Person Income Protection, which protects the lost income to the Business should a key employee be unable to work due to illness or incapacity..

How much cover do you need?

The amount of Key Person Insurance you need can be calculated in a number of ways. You could base it on a multiple of salary, or perhaps how much profit that key employee brings in. Another method could be to calculate how much it might cost to replace staff.

Whatever method you choose, it’s important to make sure your cover can help the business remain viable and dispel any uncertainty during a difficult time. Key Person Insurance can be critical in making sure the business doesn’t incur any losses, while trying to adjust and adapt.

Why do you need Key Person Insurance?

Key Person Insurance is a simple way to give you peace of mind that your business can continue even during a difficult time. It’s important that you’re able to maintain stability.

Key Person Insurance can help your business to be prepared for any eventuality. Losing a key member of staff could mean a loss of profit, skills or leadership, which can hit businesses hard. The pay-out from a policy of this kind can be used to alleviate any uncertainty, and can be used to cover a number of different circumstances.

Both small and new businesses may benefit from Key Person Insurance because these types of businesses often rely heavily on a crucial group of people.