Keyman Insurance
What Is Keyman Insurance?
Keyman Insurance is a type of business insurance policy which provides a company with the proceeds of the policy to keep the company trading in the event of a keyman/ Key Person within your business dying or becoming critically ill.
The company can use the proceeds of the policy in a number of different ways to help the company to continue to trade:-
- Proceeds can be used to employ and train a replacement if a key person dies or if the key person cannot return to work due to critical illness.
- The company can also use the proceeds to continue to pay the member of staff if they wish or to repay a company loan.
So why take out Keyman Insurance?
Virtually every business has some form of insurance such as buildings insurance, contents cover, vehicle insurance etc. All these types of cover made sense when they were taken out because without the protection, the company might not be able to run.
It is so often the case though, that many companies overlook their most important asset, their staff. Every company, no matter how large or small can single out key individulas who add a significant contribution to the success of the company. These ‘key persons’ contribute more to the company profit each year, they have more contacts than anyone else, and they motivate others around them.
Who is a Keyman/Key Person?
A keyman/Key person is someone who’s death or critical illness would have a signifcant effect on the company’s future profits. A keyman/Key person can usually be identified by:-
- Their valuable sales contacts which might be lost if they died.
- A Keyman/Key person could be the the main driving force behind the business and the individual who motivates everyone else.
- A keyman/Key Person could be someone who’s expertise on the company’s products might be virtually impossible to replace
- A keyman/Key Person could be a controlling director who had to personally guarantee a loan made to the company.
Calculating the level of cover required for Keyman Insurance