Why do I need Key Person Insurance?
In many businesses there is often one or more people upon whom a great deal relies. Management teams do not always consider the consequences in terms of income, profits, and costs, should that person die or become critically ill.
- Important skills and knowledge could disappear overnight
- There will be a time gap before a suitable replacement is found
- Turnover and profit may suffer, depending on how much of the business was generated by that person, including client relationships and market knowledge and skill.
All of this has an impact on profits and cashflow. Protecting your business with a Key Person policy will take away the financial pain and worry that can arise.
There are two solutions for Key Person Protection for companies:
Life of Another
Under the life of another solution, the company takes out a plan on the life of the key person. If the key person suffers a critical illness or dies, the plan benefits will be paid directly to the company. The funds can be used to meet the company’s financial needs while it re-organises or recruits a replacement. In the case of a critical illness claim, it is possible the key person will return to work, so the funds can be used to pay for a temporary replacement or replace lost profits.
Own Life in Trust
Alternatively, if, for example, the key person is a shareholding director, they can take out a plan on their own life and write it under trust. The potential beneficiaries of the trust would be the other shareholders. In the event of the key person suffering a critical illness or dying, the other shareholders will receive the proceeds of the plan from the trustees and can inject additional capital into the business if it is needed.
How do we work out the value of the Key Person to our business?
This is where the good advice comes in. Not only will we help you to calculate the value of your employee to your business, we will also advise on the type of trust to use. We work closely with the major providers in the UK and can involve them in the process if required.
Call for a free 30 minute consultation to find out how we could help you to put Key Person Insurance in place.