Key Man Insurance UK | Insure Your Business’ Most Valuable Staff

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Key Man Insurance UK

What is Key Man Insurance?

Key Man Insurance (Key Person Protection Insurance) is a Life Insurance policy taken out by a business on their most important employees or individual directors. By insuring your ‘key’ employees, your business can ensure it will continue to trade in event of their absence due to death, terminal illness or critical illness.

The business will receive a lump sum cash payout, which can then be used to help protect the profits, cover any revenue losses, and maintain coverage during this difficult time, all while paying a competitive premium for the policy. Every business has at least one or two key staff members who are vital to the company’s financial success and who make a major contribution to the success and profits of the business.

This could, for example, be a Business Owner, Director, Manager, or another employee with specialist skills who are important to the day to day running of your business. If that key person were to die or be diagnosed with a critical illness, it is highly likely that your business would be severely affected in a number of ways. Suddenly losing the skills, knowledge, leadership or experience contributed by that person could result in an immediate loss of productivity and profits for the business.

In addition, the costs incurred whilst having to recruit and train a replacement could be significant, and the employer may have to spend more money than anticipated to fill the void. Key Man Insurance protects businesses from the negative effects of losing their greatest asset, which is staff.  This could enable a company to continue trading smoothly and effectively in the event of a key person’s death or a critical illness diagnosis.

Lump sum payouts can also be used to cover company debt, ensure continuous coverage, and assist in recruiting a replacement employee or director. Furthermore, the payout from the insurance claim can help ease any tax implications that may arise due to the sudden change in the business’s financial situation.

Various providers offer this type of policy and choosing the best one will depend on your circumstances. Consulting with a knowledgeable adviser about suitable coverage can help identify the right policy to protect both yourself and the business.

To find out more about Key Man Insurance, the policy benefits, and how Spectrum Financial Advice can help, continue reading and also have a look at our frequently asked questions (FAQs) towards the end of the page.

Here, you’ll find content that addresses various aspects of Key Man Insurance that may interest both employers and employees. Contact us today for a fee-free, no obligation review to find out how easy it could be to protect and secure your business.

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Competitive Premiums

With our access to the most reputable, leading UK providers, Spectrum FA can source the right cover for your business with competitive premiums.

Bespoke Service

Spectrum FA provides personalised, independent advice tailored to your particular business requirements. Contact us today for a Free, no-obligation quote with a specialist Key Man Insurance UK advisor, who will research the market to find the best policy for you. We will also assist you and / or your family in the event of a claim.

Considering Key Man Insurance?

To determine whether an individual is of such importance to your business, you should ask yourself these questions:

  • Is this person irreplaceable (i.e. does he/she have unique experience, skills or talents)?
  • Does he/she contribute significantly to your business’ running (i.e. would you be unable to run your company smoothly without this person)?
  • Does he/she contribute significantly to your business’ profitability (i.e. would losing this person immediately result in a sudden loss of productivity and/or profits)?
  • Do your contracts (some or all) solely rely on his/her presence (i.e. would you lose contracts if this person was diagnosed with a serious illness or died)?
  • Would crucial business contacts (suppliers and/or customers) leave if he/she was no longer with you?
  • Are there any outstanding loans and/or other financial obligations (like investors, for instance) your company would be unable to fulfil without him/her?
  • Would your business have difficulty funding recruitment & training of a suitable temporary/permanent replacement if he/she were to become critically ill or die?

If your answer to any of these questions is ‘yes’, you should seriously consider taking out a key person insurance policy to safeguard your business against such a financial loss.

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Expert Key Man Insurance Advice UK

When taking out a key man insurance policy, several factors must be carefully considered, including risks associated with losing important personnel and proper planning to mitigate those risks:

  • The first consideration is, of course, which employees are of huge importance to the company and should subsequently be insured (see above for details on how to identify key employees)?
  • Next, it is necessary to determine the correct required level of cover (i.e. the amount needed to adequately protect your business against the loss of a important individual).

If, for example, cover is inadequate, the company may find that the lump sum provided is not enough to cover the expenses/losses incurred due to the loss of a key individual. If, on the other hand, cover is too high, monthly premiums may become unsustainable (this could especially become a problem for smaller companies).Either way, the financial security of the company could be left at risk, potentially affecting the value of shares, stocks, and savings associated with the business.

  • Whether critical illness should be added to the policy and, if so, which conditions will be covered. It should be noted here that critical illness is available either as an add-on to key man life insurance policies or as a stand-alone policy.

Conditions covered vary between providers and policies, so comparing policies and reading respective terms & conditions is important.

  • Monthly premiums, which not only depend on the selected cover level / sum assured but also vary between policies/providers. As mentioned above, keeping the cost of this business insurance affordable is an important consideration, so again, careful comparison of available policy options is crucial.

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We look at all our providers 

We have access to the leading insurance providers in the market, which allows us to recommend suitable policies based on the individual circumstances of you and your business.

Through our support, we help you understand the role of Key Person Insurance in maintaining your company’s health and financial well-being, as well as assist in planning for potential risks.

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View some of our frequently asked questions that some of our customers have asked.

What is a Key Man?

A key man (key woman, key person)  is any member of your staff who makes major contributions to your business’ daily running, profitability and success. This could be anyone with years of experience, special knowledge/know-how, leadership or other skills and talents unique to them, including:

  • Owners/Partners
  • Directors
  • Managers
  • Technical Experts
  • Other Employees with Specialist Skills

A key person is an individual whose experience, skills/talents, knowledge and/or leadership are of crucial importance to the smooth running & success of your company – and whose loss in the event of their death, terminal illness or critical illness could have a significant detrimental effect on your business and its ability to continue trading.

How to identify Key Personnel within your company

If you, like most companies (regardless of size and industry) have key people fundamental to your business’ operation, it is imperative that you consider how your company would cope if one of these individuals were to suddenly develop a critical illness or die, especially if they have a significant role within the business, such as a company director or shareholder. Proper planning and understanding of the risks involved are essential.

What is Key Person Insurance?

Often also referred to as key person cover, key woman insurance or key man protection insurance policies, a key man policy is an effective – and necessary – type of insurance policy designed to protect companies in the event of an important staff member’s death and/or critical illness diagnosis. Providing your business with a lump sum in the event of an insured key person’s critical illness or death, these protection policies provide a vital injection of funds that enables the company to cope with the immediate (loss of productivity/profits, recruitment/training expenses) and long-term (loss of contacts/contracts, necessity for loan repayments/other financial obligations) consequences of such a loss. This can allow a business to focus on growing the organisation without financial strain, ensuring it continues to generate profit. Thereby enabling the company to continue trading without major disruptions and financial difficulties, key man cover is therefore vital to the future financial security and overall health of a business.

How does Key Man Protection Insurance work?

Taken out by a company in relation to one or more key employees, key person insurance cover is paid for by the company taking out the policy. Should an insured member of staff pass away or be diagnosed with a critical condition (this depends on whether critical illness has been added to the policy), the policy pays out a lump sum payment paid directly into the business. This lump sum can then be used by the company to cover immediate expenses such as contacting HMRC, hiring/training temporary staff/a permanent replacement, and mitigate any financial losses due to loss of productivity, contacts, contracts, and so on. Without suitable key person cover in place, a business may need to cease trading immediately. Speak to our team of expert independent financial advisers today for advice and support in selecting the right policy that considers both risks and planning aspects.

How does Key Man Insurance protect businesses?

A Key Man Insurance policy can protect the future financial security of your business and it’s capacity for growth. It will pay out a pre-determined lump sum into the business, in the event of a named (insured) individual’s death, terminal illness or, if you have chosen to add the additional cover, is diagnosed with a specified critical illness. For most businesses, losing a key person would be one of the worst case scenarios. This lump sum can help protect the profits of the business, maintain confidence in the organisation, and enable your company to continue making a difference in their industry:

  • Repay outstanding commercial debts secured against this key individual
  • Mitigate any financial losses caused by loss of contacts, contracts, productivity, etc.
  • Cover the expense of recruiting/training a suitable replacement business employee or legal costs
  • Continue to pay salaries to employees
Who pays the premiums for the Keyman Insurance policy?

The policy is taken out by your company on behalf of your most valuable staff, such as the founder or product developers, and your company will also pay the premiums, which can be considered a tax-deductible expense.

Who owns the Keyman Insurance policy?

Your business will be both the policyholder and beneficiary in the event of a named employee passing away or being diagnosed with a terminal or critical illness (if this option is added to the policy).

How much does Keyman Insurance cost?

The cost of Keyman Insurance depends on numerous factors, including the nature of the job, and the industry you operate in:

  • The age of the person to be insured (the life assured)
  • Current lifestyle and medical history
  • Whether the individual to be insured is a smoker
  • How much cover is required (i.e. do you just wish to cover the financial impact of losing contracts, contacts & productivity and the cost of recruiting/training a replacement or do commercial debts need to be accounted for)
  • How long you want the person covered to be insured for
  • Whether critical illness cover is selected and, if so, which conditions are to be included
  • Whether (and, if so, which) other optional extras/add-ons are selected, for example, total permanent disability (TPD) etc, which will pay out if the individual insured is unable to work or perform certain daily tasks

Premiums and price can also vary from one insurer to the next. With access to market-leading UK insurance companies, Spectrum Financial Advice can help you obtain the right type of policy and amount of cover to effectively protect your business against the consequences of losing a key employee. Please call us for further information.

Why Spectrum FA?

With Key Man Insurance, you can protect those who are most important to your business. In the event of the death or critical illness of any of the people covered, the business will receive a single pay out, which could be used to pay off outstanding loans, recruit and train new members of staff, employ temporary replacements or lessen the financial impact of any drop in trade. Some business contracts may even specify Key Person Insurance is already in place. This can help protect all parties involved. Spectrum Financial Advice are regulated by the Financial Conduct Authority and have helped many businesses protect their key employees with Keyman Insurance. With years of experience and access to the leading insurers in the market, we will recommend suitable policies, based on the individual circumstances of you and the business. We will:

  • Assess your situation/circumstances (free of charge and without any obligation to proceed)
  • Help you determine which employees should be covered, recommend the correct type of policy (i.e. with or without critical illness and other additional add-ons) and cover level to adequately protect your business, and
  • Recommend the most suitable policy to meet your company’s needs and arrange this policy on your behalf with the most suitable provider

You will speak directly to an expert who will guide you through the process from start to finish and handle all the paperwork. To find out more about Key Man Insurance and how our professional regulated advice can protect your business against the loss of your most valuable employees, please get in touch.

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You may also be interested in these services…

We provide expert advice on a range of Personal Protection. You can protect your family and loved ones in the event of death, critical illness, or loss of income (income protection), due to illness or injury. We also offer advice on Business Protection & Group Schemes. See below some of these services.

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