What is Key Person Cover?

Key Person Cover helps protect your business from financial loss in the event of a key member of staff passing away or becoming seriously ill.

The policy is owned by and paid for by the business. It covers the life of the Key Person. If there was a claim, the sum would be paid directly to the company.

Would your business suffer financially if a key staff member passed away or was critically ill?

In the event of a claim, the policy would provide a cash lump sum which could enable your business to:

  • Recruit a suitable replacement.
  • Provide training to existing members of staff.
  • Prevent resultant cash flow problems.
  • Replace lost profits.
  • Help with the repayment of debts.

“40% of businesses would cease trading in under a year after the death/illness of a key person.” [stated in Legal & General state of the nation’s SME’s 2015]

  • Case Study

    Company A is a small business which has around 10 employees, they sell baked goods throughout the UK and director A is instrumental in seeking business opportunities, whether it be selling at country shows or pitching the products to major supermarkets. Director A is diagnosed with a serious form of cancer which means she cannot work for many months. Director B and the rest of the staff do not have the knowledge or expertise to cover the job role whilst Director A recovers. The company are therefore not able to sell and distribute their goods to any new sales opportunities and existing clients are wary of any future business because their main point of contact is not available due to illness.

    Luckily, the company had a Key Man Business Life and Critical Illness policy which paid out a sum of £100,000 upon Director A’s cancer diagnosis. This has enabled the company to spend some of the money on replacing some lost profits in the short term, with the remainder being spent on staff training/recruitment. If they had not had the lump sum, the company could have had a huge reduction in cash flow due to lack of sales. This, in turn, could have resulted in the folding of the business.

Who is a Key Person?

A key person is any member of staff whose knowledge, skills and expertise has a direct impact on the success and profits of the business.

This could be, but is not limited to, the following:

  • Directors
  • Business owner
  • Head of departments
  • Any staff with skills or knowledge pivotal to the success of the business.

Why include Critical Illness cover?

If a Key Person suffers a critical illness, such as a stroke or heart attack, it may be some time before they are able to work again. They could potentially never be able to work again.

By including critical illness cover, if a claim is made this could help cover the cost of recruitment, training and the salary of a replacement staff member, even on a temporary basis.

What additional benefits do Insurance Companies offer?

A number of Insurance Providers offer additional free benefits within their policies.  These can include, but are not limited to, the free services of a Recruitment Company and medical therapies for the ill employee, to assist in their return to work.

Would you like some advice?

Contact one of our team now to get impartial & helpful advice

Call 0800 644 4468Mobiles call01737 336 990