What it covers

– Death or terminal illness of the insured key person

– Serious long-term incapacity if the policy includes this option

– Payments to the company, not the individual

How it works — simple steps

1. The business takes out a policy on the life of the key employee.

2. If the insured event happens, the insurer pays the business a lump sum.

3. The business uses the money to stabilise operations, repay debts or hire someone new.

Who should consider key person insurance

Think about cover if the person would cause a major loss of revenue, a contractual breach risk, or would be difficult or costly to replace. Typical examples:

– Founders or managing directors

– Sales leaders generating most revenue

– Specialist technicians with rare skills

– Employees named as security for loans or contracts

How much cover do you need?

No one-size-fits-all answer. A common approach is to calculate:

– Projected lost profits for 12–24 months

– Costs to recruit and train a replacement

– Loan repayments and other liabilities linked to the key person

If you want, we can run a quick assessment to estimate an appropriate sum assured.

Is key person insurance taxable?

The lump sum is usually paid to the company. Tax treatment can vary in complex situations. Speak with an accountant for your circumstances.

Can a director be insured on a policy?

Yes. The business can insure directors and senior staff as long as the company has an insurable interest.

Will the insured need medical checks?

Often yes. Insurers assess health, age and occupation. Smaller sums sometimes qualify for simplified underwriting.

How long does cover last?

Term policies have a set period, common terms are 5, 10 or 20 years. You can renew but premiums usually rise with age.