Key Person Insurance

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Key person insurance (also known as key man insurance) protects your business against the loss of an individual who is critical to the company, either through death or long term illness, and is an important part of your business protection strategy. The smart money is on the business that has a strategy to mitigate the impact of losing a key person – the people risk.

What is key person insurance policy?

Key person cover is essentially a form of life insurance taken out on an employee, upon whom an organisation is highly dependent. In the event that this person dies or is diagnosed with a critical illness, this type of policy will pay out a lump sum of cash in order to alleviate the resulting financial hardship.

A key person insurance policy provides the funds to continue trading, to maintain profit, fund a replacement, pay off a bank loan or repay a directors’ loan account – all fundamental to maintain business continuity.

How can Partners& support your business with key person insurance

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Challenge

It is important to ensure that your business remains in the right hands at the right time. It is also incredibly important if something unexpected were to happen to a key person that the business will be able to continue moving forward.

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Support

Key person insurance can be customised to protect against only the death of a key person, such as a shareholder, or it can include both death and critical illness as triggers for the policy. Organisations that purchase this type of cover will be responsible for paying the premiums, which are generally guaranteed over the course of the policy’s term length.

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Perform

We work closely with our clients to fully understand their business structure, how they operate and who they really rely upon. Only then can we provide the right advice that will make a difference to your business when it counts.

Person pushing towards the finish line, challenge icon

Challenge

It is important to ensure that your business remains in the right hands at the right time. It is also incredibly important if something unexpected were to happen to a key person that the business will be able to continue moving forward.

People support icon

Support

Key person insurance can be customised to protect against only the death of a key person, such as a shareholder, or it can include both death and critical illness as triggers for the policy. Organisations that purchase this type of cover will be responsible for paying the premiums, which are generally guaranteed over the course of the policy’s term length.

Performance icon with 3 stars

Perform

We work closely with our clients to fully understand their business structure, how they operate and who they really rely upon. Only then can we provide the right advice that will make a difference to your business when it counts.

Business people in a meeting discussing graphs

Who is a key person in your business?

Key people come in all shapes and sizes – ultimately, they are the people on whom the business is dependent in some way.

Take a moment to look inside your business and think about who you really rely on:

  • Business owners who set the strategic direction and run the business
  • A sales person or director who has a major impact or influence on profit
  • Specialists whose skills are hard to replace
  • People who hold relationships with third parties (banks, suppliers or key clients)
  • Anyone who takes on sole responsibility for certain aspects of operations, such as a technology officer (if the only person who understands various software of systems is no longer able to perform their duties, a major business interruption may occur)

Take a moment to look inside your business and think about who you really rely on. The gauge will show how key they are to your organisation and if you click on the result button the consequences of that person leaving the business can be seen.

Do you know who your key people are?

How does key person insurance work?

Key person insurance can be customised to protect against only the death of a key person, or it can include both death and critical illness as triggers for the policy. Organisations that purchase this type of cover will be responsible for paying the premiums, which are generally guaranteed over the course of the policy’s term length.

In the event of death or terminal or critical illness of the named individual, the employer would make a claim and the policy would pay the employer the agreed amount, enabling the business to continue uninterrupted.

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The benefits of having a key person insurance policy

According to industry experts, 46 per cent of UK businesses would be unable to continue trading if a person died or was unable to continue their duties due to injury or illness.

Although organisations of all sizes should consider key person cover, small organisations in particular may have the most to lose without it. Such organisations may often be reliant upon a small number of leaders. If one of those leaders were to suffer a tragedy, would their replacement instil the same level of confidence and loyalty among employees? It is possible that a dip in profits or operational interruption could lead to lower morale and employees seeking out other opportunities. The culture and future of the organisation could be at risk.

Key person cover provides much-needed security and stability during times when an organisation may be in its darkest hour. In the event of an important leader or other member of the team experiencing misfortune, policyholders will at least be able to have some financial relief while handling the hardship of the event itself. Choosing the right key person policy is different for each business. It can be customised to protect against only the death of a key person or it can include both death and critical illness.

 

Questions to consider when choosing a key person insurance policy for your business

  • Who does your business rely on for contribution to turnover, client introductions, operations management?
  • Would your business be affected if a key employee were taken ill or even worse?
  • In view of the difficult economic climate, would you be able to retain clients / keep employees motivated / repay loans?
  • Is any debt adequately covered should the worst happen?
  • Could your families maintain their standard of living without support from the business?
  • How do you retain control of your business in the event of a shareholder passing away?
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Key person resources

Wellbeing, Health and Protection Brochure

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Facio ut Facias - I do, that you may do, is a well-known Latin civil law term.

Thinking the Unthinkable

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Meet the key person insurance team

James Porter

Managing Partner - Wellbeing Health & Protection

Cate Mason

Client Executive – Business Protection

Yusuf Ali

Client Executive
James Porter Headshot

James Porter

Managing Partner - Wellbeing Health & Protection
James is a financial risk specialist with experience working with a wide range of clients during his time at Aon, Barclays Wealth Management and Mercer. He joined Partners& in 2020 to design and lead our wellbeing, health and protection proposition which has gone from strength to strength due to the combination of his people skills and his technical expertise.
Cate Mason

Cate Mason

Client Executive – Business Protection
Yusuf Ali

Yusuf Ali

Client Executive