What is keyman insurance
What is keyman insurance – what does it cover?
Key person insurance is a type of cover designed to protect a business against the risk of ‘key’ staff members either passing away or suffering a critical illness, such as cancer for example.
It is worth considering what the consequences would be if a director or employee with specialist skills died or became seriously ill? This can often have a large impact on a business in terms of lost revenue and staff replacement costs.
How does keyman insurance work?
This type of cover is essentially a specialised life insurance policy with added critical illness cover (optional but usually recommended) taken out buy a business written on the life of a key employee or director.
Thus, if that staff member died or suffered a critical illness condition (which may mean they are no longer able to work) then the policy would payout a lump-sum to the business. The business can use the subsequent funds as they see fit.
keyman insurance cover?
The loss of a business partner or top sales person could have a huge impact of future profit and may be very expensive to replace in terms of recruitment costs and training. If a director passed away there may also be issues with raising finance or repaying business loans. The policy is designed to cover such losses.
Is it worth having given the chances of passing away? This would depend of your risk appetite but the chances of dying during your working life are 1 in 7 for men and 1 in 11 for women (1), so the risk is very real and often underestimated. Naturally the risk of a critical illness is far higher.
(1) Based on ONS data estimates for the years 2008-2010.
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 020 8432 7333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.Source: www.drewberryinsurance.co.uk