Keyman insurance

A financial planner will tell you that keyman insurance is a must for any small business owners to help safeguard your business profits in the event of the death or illness of your nominated employee.

Over 90% of companies in the UK have 10 or less employees so at least one of these people is bound to be a key employee.  A key man or key person is someone within the company who adds real value to its existence.

These key people often have the most contacts, sell the most and are passionate about the company’s future. Without them the company might not be as profitable. Every company or business will have someone who is key to its continued success but without them the company or business may not survive.

In a small business this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to your business, the ones whose absence would sink the company. It makes sense to insure them so the business can have a chance or surviving.

Keyman insurance is simply life insurance on the key person in a business. You as a small business owner will purchase a life insurance policy on the key employee, pay the premiums and be the beneficiary of the that policy. If that person unexpectly dies, the policy pays out the proceeds and they go directly to the company and not to the individual, which is how it differs from a life or critical illness policy.

Your company can use the insurance proceeds for expenses until it can find a replacement person, or if necessary, distribute money to investors, pay off debts, pay redundancy to employees and close the business down in an orderly manner if necessary.

Once again there are tax implications around this financial planning so experienced independent financial advice is essential.

Any questions on keyman insurance?

Please call us on 01582 839280 or Email us if you have any questions.