Key Person Insurance allows a limited company to plan for the potential financial loss that it would suffer on the death or serious illness of a key employee.
What is a key person?
- A key person is any person on whom a business depends for continued success & profitability
- Can be an employee or a director
- must have an employer/employee relationship
- Found within Limited Companies, Partnerships & Sole Traders
Why have Key Person Insurance in Place?
- Often in small to medium sized company, success & profitability may depend on one or two employees
- There may be extended delay & more expenses in recruiting a replacement. Consultants may need to be employed
- Occasionally, there may be loans recalled by the lender or loans may be repayable to legal rep. of deceased
Level of Cover
- Must equate, as accurately as possible, to the drop in profitability as a result of the loss of the services of the insured individual (key person)