Spectrum Financial Advice Guide to Key Person Insurance UK

What is Key Person Life Insurance? Learn everything you should know about protecting your key employees in our guide to key person insurance UK.


  1. Spectrum FA Guide to Key Person Insurance UK
  2. Key Person Insurance UK
  3. What is Critical Illness Cover?
  4. Who or What is a Key Person?
  5. Short & Long-Term Ramifications of Losing a Key Employee
  6. How Does Key Person Life Insurance Protect a Business?
  7. Which Conditions Will Be Covered if Critical Illness Cover is Included?
  8. What is the Cost of Key Person Insurance?
  9. Who Pays for Key Person Insurance?
  10. Who Should Have Key Person Protection?
  11. How Can Spectrum FA Help You with Key Person Insurance?

Spectrum FA Guide to Key Person Insurance UK

Business protection insurance experts Spectrum FA have been assisting companies of various sizes across all industries protect their key personnel with key person life insurance for many years. But exactly who or what is a key person, how does this type of business protection policy work and who should have it? Learn all this and everything else you should know about protecting your key employees in this comprehensive guide to key person insurance UK.

Key Person Insurance UK

An important element of protecting your business’ future financial security, profits and growth, key person or key man insurance is a type of life insurance designed to protect your business against the short and long-term effects of losing a key employee.

Policies are taken out by your company on behalf of your most valuable staff member/s, with your business being both the policyholder and beneficiary in the event of a named employee passing away.

Most policies also offer the option to add critical illness cover as an optional extra.

Are you considering key person protection? Contact Spectrum FA now to learn more and request a free no-obligation review.

What is Critical Illness Cover?

When selected as an add-on to key person life insurance, critical illness cover protects your business in the event of an insured employee developing a critical illness that is specified within the policy’s terms & conditions.

Different policies may cover different conditions/illness. For a range of conditions/illnesses likely to be covered, please go to: Which Conditions Will Be Covered if Critical Illness Cover is Included?

Contact Spectrum FA today to arrange a free review (no obligation) and learn more about critical illness cover/key man insurance.

Who or What is a Key Person?

However large or small your company may be, it is highly likely that you, like most companies across the country, have at least one or two members of staff whose contribution to your business is of key importance to its smooth running, productivity and future profits & growth.

The importance of these staff members could be due to their:

  • Exceptional leadership, inter-personal, technical or other specialised skills
  • Unrivalled know-how/knowledge and experience in specific aspects of your business and how it operates
  • Impressive talents only they possess

Others may be crucial to your business because they act as guarantors for your business liabilities (i.e. your company’s commercial debts – commercial mortgages, development loans, overdraft facilities, asset finance, etc. – are secured against them).

As such, your company’s key personnel could, for instance, include one or more:

  • Company owners (i.e. yourself and/or partners & shareholders)
  • Directors, managers and/or designers
  • Technical or marketing experts, sales executives and/or
  • Any other member of your staff who has unique skills, talents and/or experience

Whoever these invaluable members of your staff are and whatever the reason for their critical importance may be, losing one of them due to a sudden death or critical illness diagnosis could have significant and detrimental effects on your business, its productivity, profits and ultimately its future financial security, growth and success.

Contact Spectrum FA now to find out how we can help you prevent these effects putting your company‘s future at risk.

Short & Long-Term Ramifications of Losing a Key Employee

While the potential effects of losing such a key person could have on your business depend on this individual’s specific area of expertise, skills, talents, experience, etc., their inability to work due to a serious (critical) illness or death could immediately cause a loss of:

  • Productivity, which will ultimately result in loss of profits
  • Crucial contracts/business contacts specifically associated with, developed & maintained by this employee
  • Customer and/or supplier goodwill and their confidence/trust in your company

If the critically ill/deceased key individual is/was a guarantor for any of your company’s outstanding commercial debts, these debts may also become immediately repayable in full. Unless you have access to the necessary funds to make such repayments, this could leave your business facing significant additional financial pressure at an already difficult and uncertain time.

In addition, your company may also have to advertise for, recruit and train new temporary or permanent staff with the necessary skills/experience to replace this invaluable individual. This, of course, can be costly both in terms of time and financial expenses.

Considering these ramifications, the vital importance of protecting your business against the loss of your most valuable staff members becomes all too clear.

Request a free review of your company’s key person protection needs today. Please note, that while we highly recommend allowing our experts to advise and assist you in obtaining suitable key person cover, requesting a review does not put you under any obligation to do so.

How Does Key Person Life Insurance Protect a Business?

A key person insurance policy protects your business’ future financial security and capacity for growth by paying out a pre-determined lump sum in the event of a named (insured) individual’s death or, if you have chosen to add the additional cover, is diagnosed with a specified critical illness.

This lump sum then enables your company to:

  • 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
  • Continue to pay salaries to employees

To ensure your business is adequately covered, it is, of course, imperative to:

  • Determine precisely which employees should be covered
  • Carefully consider which, if any, add-ons (i.e. critical illness cover) should be included
  • Set cover amount at the correct level, i.e. ensure the amount to be paid out in the event of a key person dying/developing a critical illness is high enough to mitigate some or all the effects shown above (which again depends on each insured individual’s specific experience, area of expertise, talents and/or skills). If the person to be insured is, for instance, a shareholder who is also a business liability guarantor, cover for this person would need to provide for the possibility of having to repay relevant business debts.
  • Ensure premiums are at a level that does not put unnecessary financial pressure onto your business

Spectrum FA can assist you with all this and more, including, for example, which conditions/illnesses to include if you decide to add critical illness insurance to your policy. To find out how, get in touch with our team of key person protection experts today.

Which Conditions Will Be Covered if Critical Illness Cover is Included?

As we mentioned earlier, the conditions/illnesses included in critical illness cover vary between different policies and, of course, insurance companies. Most policies do, however, include a set of standard conditions as specified by the Association of British Insurers. These standard conditions can include:

  • Stroke, multiple sclerosis & kidney failure
  • Major organ transplants & multiple defined, specific types of cancer
  • Coronary artery bypasses & major heart attacks

In addition, many policies offer cover for more extensive ranges of conditions. Often consisting of and including, for instance:

  • Liver and/or respiratory failure (advanced stage), aorta graft surgery and/or bacterial meningitis
  • Traumatic brain injuries, benign brain tumours and/or aplastic anaemia
  • Heart valve repairs/replacements, Creutzfeldt-Jakob Disease (CJD) and/or coma (and any associated permanent symptoms)
  • Alzheimer’s disease/dementia, encephalitis and/or cardiomyopathy
  • HIV (if contracted via an accident at work, blood transfusion/s or physical assault)
  • Open heart surgery (incl. median sternotomy), Motor neurone and/or Parkinson’s disease
  • Permanent loss of speech, deafness and/or blindness
  • Eyeball removal, loss of a limb (foot or hand) and/or total permanent disability/paralysis
  • Permanent multiple system atrophy and/or progressive (and permanent) supranuclear palsy
  • Systemic lupus erythematosus (when accompanied by significant complications) and/or third degree burns (if 20% of the body’s surface area, face or head is covered)
  • Primary pulmonary hypertension and/or spinal stroke/stroke (when accompanied by symptoms lasting 24 hours or longer)

While some policies may cover these conditions as part of their “standard range”, others may list some or all of them, as well as a diversity of other critical illness (please contact us for more detailed information) as part of their optional extras.

Obtaining the most comprehensive cover at the most competitive premiums can be complicated. Specialising in key person life & critical illness insurance, we can ensure you receive the most suitable cover for your employees at competitive premiums. Get in touch now to learn more.

What is the Cost of Key Person Insurance?

The cost of key person protection depends on numerous factors including:

  • The age and medical history of the person to be insured. Premiums would, for example, be much higher for an older employee with a long history of potentially serious health conditions than they would be for a younger individual who has never been ill in their life.
  • Whether the individual to be insured is a smoker (which would obviously expose him/her to a much higher risk of developing/dying of related cancers)
  • 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)
  • 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

Premiums can also vary from one insurer to the next. With access to market-leading British insurers’ policies, Spectrum FA can help you obtain the right type and amount of cover to effectively protect your business against the consequences of losing a key employee.

Please get in touch and request a free no-obligation review with our experts today – and we will do the rest.

Who Pays for Key Person Insurance?

Although key person protection policies cover the life of employee, the company taking out the policy is both the policyholder and its beneficiary. As such, you (your company) is responsible for the payment of premiums.

Who Should Have Key Person Protection?

Any company with one or more employees whose experience, talents/skills or other contributions are of crucial importance to the company’s future growth and financial security should consider taking out key person protection insurance.

How Can Spectrum FA Help You with Key Person Insurance?

With our in-depth key person protection knowledge, extensive experience & expertise in the field of business protection and access to industry-leading insurance company’s most competitively priced and reliable policies, Spectrum FA fully understand that every business’ specific needs are different.

As such, we offer completely tailored services and will assess your business’ specific needs thoroughly before making our recommendations. Once you have made your choices and decided the options you wish to proceed with, we will arrange suitable policies that will meet your requirements, while keeping premiums competitive.

To learn more about key person cover/other business protection options and/or to request your free, no-obligation review, please do not hesitate to get in touch today.