If the success of your business depends heavily on certain individuals, Key Man Insurance can help you protect the business against the loss of a valued member of staff
Your key individuals may have knowledge, skills and connections that would be very hard to replace. If you’d like to know more about Key Man Insurance, or would like a quote for your business, contact us for more information. We’ll be happy to help and to talk you through the information we need to help you find out the cost of suitable cover.
How does Key Man Insurance work?
Many businesses depend heavily on key individuals. Sometimes the future of the business could even be at risk if that individual died or became critically ill. Key Man, or Key Person Insurance means that the business is insuring itself against the financial loss it would suffer if a key employee died or was diagnosed with a specified critical illness. The policy is owned and paid for by the company, so any payout in the event of a claim would be payable to the company.
Key Man Insurance pays out a lump sum to the company to help it survive a drop in income and plan to recover. Here are some examples of how the lump sum could be put to use to help the business continue:
- Recruitment fees to find a replacement
- Training costs to develop an employee to the same standard
- Contributing towards salaries and overheads until income returns to normal
- Continue paying for any loans or debts that are specifically insured
The worst case scenario is that the business will simply no longer be viable after the loss of a key individual such as the owner or principal. Should that happen, the business may still need funds to pay severance to staff and wind the business down, which could be done with the lump sum from the Key Man Insurance.
If key individuals are shareholders, you may want to consider Shareholder Protection, which more specifically addresses the needs of businesses with shareholders.
Do you need Key Man Insurance?
Almost every business has key individuals, and ultimately only you can decide whether or not it is right for your business. Here are just some of the things you should consider, as these will have a bearing on whether or not you need cover, and if so at what level of cover:
- Intentions of the remaining directors and managers
- The cost of recruiting or training a replacement
- The company’s debts and outgoings
- The number of employees and the wageroll
- The costs of winding down the business
Alternatively, you may find that you need to buy Key Man Insurance because you are requested to by a bank, investor or customer. If so, we can help you and ensure that we provide a level of cover that meets with their requirements.
How can JM Glendinning help you?
We’ve been established since 1987 and have an experienced team of advisers. They have helped many businesses with Key Man Insurance, Shareholder Protection and a wide range of other financial services and products.