What is Key Person Insurance?
While every team member has an important part to play in the success of a business, there are always going to be certain members of staff whose loss would have a detrimental effect on the business above and beyond the norm. Key Person cover is designed to financially protect businesses against the loss of such a person.
Key Person Insurance (AKA Key Man Insurance) provides businesses with cash compensation if the insured person is unable to work because of death or illness. That key person could be either an employee or business owner – the point is that their loss would result in a significant financial impact.
Key Person Insurance allows business owners the peace of mind that any unforeseen hiring or running costs do not leave them out of pocket.
Hooray Health & Protection specialise in helping small businesses source great value deals on Key Person cover. If you’d like FREE advice on this or any other type of health insurance scheme, contact our team of friendly brokers.
How much Key Person Insurance do I need?
When it comes to Key Person Insurance, there is no one-size-fits-all approach. Your business has its own individual needs, which means the cover you require will also be unique.
As broker, we can only offer worthwhile advice on a one-to-one basis. That’s why we always begin by getting to know your business thoroughly. Here are a few examples of the kind of questions we ask:
- How much does your key person contribute towards the business profits?
- Does the business have any outstanding debts that need to be covered?
- Are there any key clients or suppliers that rely on your key person’s relationship?
- How much would it cost to replace your key person? (Hiring, training costs etc)
Businesses – and SMEs in particular – are extremely vulnerable if they lose a key person and we understand that the cost of this could be detrimental to your business.
Although the needs of each business vary, we generally advise an annual review of how your business would cope if a key person fell ill. In a free telephone consultation, we can review your options and assess this risk for you.
Is Key Man Insurance a Tax-Deductible Expense?
In general, HMRC sees Key Person Insurance as a tax-deductible expense if it is taken out solely for the business’ requirements.
We are not tax experts here at Hooray, so we strongly advise seeking guidance from a tax expert before taking out any insurance policy.
Who Can I Protect with Key Man Insurance?
As each business is different, so are their requirements for Key Person Insurance.
Most of the Key Person Insurance policies we set up are for Managing Directors, CEO’s, and Directors whose loss would have a detrimental impact on the overall business.
Some companies will also cover their key sales personnel, without whom they would suffer a significant loss to profits or relationships.
Other businesses will rely heavily on operations managers for the day-to-day handling of the business, in which case it may be crucial to be covered for their replacement.
Our friendly advisers here at Hooray Health & Protection can complete a business fact-find for you, to establish which employees are key staff.
How much does Key Person Insurance cost?
The price of Key Person Insurance will vary massively across each provider, but we are here to help you find the best deal for your business.
Key Person Insurance is not a set price per person, but an assessment of the risk to the insurer – a term known as underwriting.
Insurers will first take into account factors such as the key person’s age and medical history and will then decide a premium based on the facts provided.
Next up, they will review the level of cover in comparison to your business risk and any other optional extras you may have included.
How long does Key Person Insurance last?
How long the Key Person Insurance policy lasts is completely up to you and what term your business needs the cover for.
We can provide various quotes at two years, five years, ten years or even up until retirement age.
How long will it take for me to be covered?
This is one of the most common questions we hear, and, luckily, the answer is often ‘not long at all’.
We will have an initial chat to learn about the business and your requirements, which takes on average about 15-30 minutes.
Next up, we run this information through our panel of insurers, and (as long as the amount of cover is around the average amount, the key person is healthy and there are no red flags) we can get protected straight away.
However, sometimes further information might be required, in which case the process will take a little longer.
In such cases, this can mean that we will have to refer your case for medical underwriting. This usually means just an additional form but can also require a full medical screening or GP report.
We understand that this isn’t ideal, so it is where we can leverage our commercial relationships with insurers to ensure we are providing our clients with their terms quicker than going direct.
Why use Hooray Health and Protection for Key Person Insurance?
Hooray Health and Protection understands the variety of protection policies out there, and we will make sure we find the perfect cover for your Key Person.
We don’t tell you what to do; we work with you. We will always find out the key considerations for you before advising on the right level of cover.
Our favourite thing about brokering insurance is being able to provide you with the best possible price, using our insurer relationships and specialised experience.
Key Person Insurance – FAQs
How much does it cost to arrange a Key Person Policy?
We do not charge any fee to arrange your Key Person Insurance as we are paid a commission by the insurance company.
Can we add Critical Illness to a Key Man Policy?
Yes! We can add Critical Illness insurance to your policy or look at a standalone option.
Who is the owner of our Key Person Policy?
As the business is protecting itself against the loss of a key person, the business is the policy owner.
Can the Employee we covers family receive the payment?
Unfortunately, no. This is to protect the business against the loss of a key person. If you want their family to receive a payment that would be Group Life Insurance.
If I need a medical for Key Man Insurance where will it be?
We work with the insurer to find somewhere usually within 15 minutes of your home or work address. We can also review a medical at your home or work address if you would prefer.
How can I be guaranteed to find the best Key Person Insurance?
The short answer is that you need to research the whole market to find the best deal - what's ideal for one business, might not be ideal for yours. But there are two ways to go about this. The first option is to go it alone and read through dozens of different policies, arrange calls with different insurers, compare and contrast quotes and choose which you think is best. The second option is to hire an expert broker, like Hooray, to do all this on your behalf - and ensure you're getting independent advice, and not being guided by persuasive sales advisors! We recommend the latter as it will save you a lot of time, take away all the stress and ensure you're getting the best advice.