Key person insurance is to protect your business against the financial losses that could result from either the serious illness or death of someone who is employed in your business.
Whilst companies automatically insure the buildings they operate from, or the cars they drive, many do not consider one of the most important elements of their business, its people.
A key person is anyone who has specialist skills or knowledge, or specific areas of responsibility who’s loss would negatively affect the company financially.
Key person insurance is relevant when that key person could not quickly and easily be replaced. Whilst everyone is ultimately replaceable, the time it could take to replace them would be detrimental to the business.
Key person insurance provides the cash to ensure that profits are maintained whilst you replace them.
When thinking about key person insurance you need to consider the following:
What are the potential problems your business could encounter after losing a key person?
Can these potential problems be insured against?
What level of profit would you expect to lose?
What additional costs will you incur such as recruitment, training, loss of goodwill?
How long do you need the cover to be in place for?
Our advisers at Tom French & Associates will, using our financial planning process work through these areas with you and help determine the type of term the plan needs, how the plan is to be set up and what the tax situation will be.
The provision of Key Person insurance is complicated and requires a methodical approach. Our advisers are ideally placed to assist you in this, ensuring that you get the best cover for your needs.