It is an insurance policy, which protects your business, in the form of a single lump-sum cash payout, if you or any other people in your organisation whose long term absence would affect the business running smoothly. You can insure the person for an amount that you would need to ensure minimum disruption, whether that is money to pay someone else to come into cover their role or an amount to cover the income they would bring in. Typically a year or 2 years replacement costs as the type of illnesses covered, cancers, heart attacks, strokes, MS etc, could leave the key Person incapacitated for 6 months or even a couple of years. The plans can run from 5 years, all the way to retirement age, and a few of the insurers now go to 80.
If your most valuable member of staff or yourself needed long term treatment for an illness and couldn’t work, would someone else be able to cover that role, longterm? If the answer is no, then Yes! The idea is to have a monthly amount to spend on the premiums that won’t hurt the business too much, and an amount of cover, which would enable you to get someone or a few people to help run the company so the profits remain the same and the service you provide doesn’t drop.
With many small businesses, the answer is probably you. If the owner needs more than a year off work, Legal & General suggest over half of businesses would close. The payout can keep you going while the business is on hold or can enable you to get others in to carry out your role.
For others in the business, it could be your Top Salesman, Best Engineer, Specialist in a certain role etc. (We have set up KeyPerson for Managing Directors, Accountants, Consultants, IT specialists, Dance Instructors, Estate Agents etc. Any walk of business life.
Key Person life insurance which just pays out if you another KeyPerson you insure dies, or gets a terminal illness and are told they have 12 months to live. The older you are the more it costs and certain medical condition and your body mass index can also increase prices, which is why we recommend one of our FCA regulated advisers give you a FREE, no-obligation call. You can then look at the quotes, which they will email to you, and decide if it looks good or not.
This costs about 5 times more than just life insurance because you are much more likely to get an illness and service in your working life than to die. As you can see from the quote above, if you are a healthy 30-year-old, non-smoker its £2.58 a week, for £50,000 life and illness cover for 10 years. So, if you had a heart attack the business would get £50,000 to spend on getting someone to replace you, while you recover.
Yes, you can. This can be a key man so the payout goes to the business if the person insured passes away in the set term. There is also Relevant Life, which is an HMRC approved way of paying for your life insurance through the business. Any payout would go, in full, to your chosen relative with no inheritance tax liabilities.