How to Insure a Keyperson

How to Insure a Keyperson?

When operating a small to medium size enterprise in the UK, one thing that is common to most companies is the fact that there are key persons who keep the organisation going on a daily basis.

Whether it is a top sales person, an office manager or simply an employee who has been with the business for many years and is a point of contact with clients, the loss of that key person could cause considerable financial hardship for the company.

Key Person Insurance can be purchased to safeguard against temporary or permanent loss of anyone integral to the daily operations of a business and can help to offset the financial loss until a replacement can be found.

Who Can Be Covered on Key Person Insurance?

One of the first things to investigate when looking at how to insure a key person is who can be covered. The first thing to understand is that sole traders and companies can take out policies on key personnel but partnerships are handled differently in Wales and England.

If the key person is one of the partners then there are two ways to go about handling this. For example, the partnership can take out a joint policy on all partners involved or the person/partner to be insured would take out the policy in trust for the other partners.

To put it in simple terms, a company can take out Key Person Insurance on any person whose absence would cause financial loss.

How to Insure a Keyperson

Amount and Duration of Cover

It is important to be realistic in the amount of cover you want to purchase. Careful analysis should be given in terms of exactly how much financial loss a company would sustain on both a short and long term basis if a key person suddenly dies or becomes critically ill.

If that person could be replaced quite quickly, then short term key person insurance is reasonable, such as would be the case with a project manager on a contract job.

On the other hand, if it would take a long period of time to replace that employee then long term insurance can be purchased and the policy would obviously have higher limits. This is why it is important to make a careful analysis of just how much cover is needed and how long it will be needed.

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Where to Find Key Person Insurance?

Key Person Insurance can be found in a number of ways, but the very best option is to do an online search of companies that sell business or commercial insurance. In this way it is possible to compare online quotes on a like-for-like basis to see which company offers the best cover at the most affordable prices. Also, bear in mind that if cost is an issue, you can often get discounts for shopping online and discounts from insurance companies when you purchase other types of insurance at the same time. This is often referred to as a multi-policy discount so if you are shopping for Key Person Insurance you might like to look at liability, buildings or contents insurance at the same time.

One last point to keep in mind is that some types of Key Person Insurance are tax deductible so you may want to speak with your local taxman before purchasing cover. Find the policy that is right for your company after learning what can be written off as a business expense. In any event, if there is a person or persons whose absence would create financial loss for your company, don’t go without Key Person Insurance. There is no reason to sustain a loss if proper cover is available.

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