Advice on protecting key employees within the business
If your business relies significantly on the hard work of a particular key team member, it can be both emotionally and financially challenging if that person suffers from an injury or dies. Not only will team morale be affected but, in many cases, profits can take a hit too and the workload can quickly become overwhelming for your team. Often, we’re talking about people who are directors or managers within the company.
What is key person insurance?
Key person insurance is a type of life insurance policy which covers an important person within a business. Often this is the owner, but it can be anyone who helps keep the business afloat, such as a top salesman, or someone who influences the long-term strategy of the business. The purpose of key person insurance is to provide the business with financial support, which helps ensure that the company stays profitable and meets its liabilities on time. The premium will be paid by the business as an allowable expense. When a claim is made, proceeds are paid to the company and treated as a trading receipt.
Benefits of key person insurance include:
- Flexibility and Minimised Disruption The pay-out can be in the form of a regular income to the business or a lump sum. This can help with the expenses of recruitment when filling the skills gap that the key person left behind.
- Payment protection Across flexible policies, you have the option to cover different aspects of the business. This might include important payments that are key to keeping you in operation, such as loan repayments, staff salaries, sick pay or utility bills.
- Reassurance to your lenders Some business loans may require you to take out a form of key person protection, as this reassures banks that the loan will be repaid, even in unfortunate circumstances.
- Protection if you’re a sole trader If you are a sole trader, there is a strong chance that you are personally liable for your business’ debt. Instead of passing this on to your family, you can cover any debts or liabilities that are still outstanding with key person insurance.
Key person insurance policies are very flexible and unique. They are designed to take individual business cases into consideration. So speak to one of our specialists today for advice on what cover is best suited to you and your company.
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