Protecting your business against the impact of critical illness, terminal illness or death of key members of staff.
What is Keyman insurance?
The most valuable asset to any business is its workers.
Keyman Insurance also referred to as Key Person Insurance is a policy designed to protect your business from the financial strains of losing those key members of staff.
It is a form of Life Insurance that protects your business by paying a cash lump sum if a key member of staff dies or becomes terminally or critically ill. This could be anyone who is essential to the everyday running of the company. For example, the business owner, founder or an employee you simply can’t do without.
Who is defined as a Key person?
A key person could be anyone who is crucial to the day-to-day running of your company. This isn’t always or just the director, it can be anyone whose skill, knowledge and experience affects revenue.
A way to establish who a key worker is in your business, think about what responsibilities might a key person have? Are they an exceptional talent? Are they an employee with multiple contacts, are their duties to ensure your business stays accessible online. There are lots of roles that are covered within Keyman Insurance.
Another way is to consider if any loans or financial commitments depend on that person, whether their loss would have an impact on sales, or whether their absence would have an impact on future planning.
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How can Keyman Insurance help your business?
Keyman Insurance can help with much needed financial support. If you lose a key staff member and a lump sum payment is received from your claim, this can help your business by:
- Providing a buffer against loss of profits.
- Paying for recruitment and training to replace the key member of staff.
- Repaying outstanding loans.
- Making up for loss of important personal or business contacts.
- Assisting with loss of confidence from suppliers and customers.
- Easing difficulties in raising finance for new developments.
- Making up for loss of detailed knowledge of the business’ processes and systems.
- Winding down the company in an orderly fashion.
Keyman Insurance won’t replace the business owner or employee but will help support you business financially should something happen.
In order to take out Keyman Insurance, the business will need to have a financial relationship with the individual. For Example, if you own a business, and are the Director of that limited company, you can take out Keyman Insurance with the agreement of the person who is being covered.
They would need to work for the business directly.
There is no right or wrong time to take out this type of insurance.
If your business is a start-up, you may be dependent on one or two individuals who are fundamental to the business’s success, which case you may want to take out a policy early. A larger company on the other hand may have greater resources and the ability to substitute key staff with other personnel. They may also need to update or add individuals throughout the year.
However, established companies have larger overheads, so if the loss of one individual affects revenue, the consequences for the business could be serious. Every business is different, but key employee insurance can provide a safety net for your business.
Running a business successfully isn’t just about building on the things that can make you money, it’s about having contingencies in place to prevent you losing money.
The sad reality is that the loss of a key person in your business could have a severe impact. With a crucial member of the team absent, any business could suffer badly, with sales and profits falling and increased workloads for the remaining staff.
Key Person Protection is one way to safeguard your business against the death, terminal or critical illness of a key person in your organisation. It’s designed to pay out a lump sum on the death of the insured key person during the length of the policy, helping compensate for the loss of their skill, knowledge, experience or leadership.
Why is Keyman Insurance so important for your business?
According to Legal & General’s most recent survey of SMEs, 52% of businesses would not be able maintain trading levels and would fold within a year due to the loss of a key person. Having said that, Legal & General also found that half of businesses don’t have any protection against such a loss.
Unprotected businesses are therefore running the risk of severe disruption to business continuity should they lose any of their key people.
What would be your commitment as a business?
- To provide a fair presentation of the risks
- To provide complete and accurate information on all members within the policy within the given time period
- To notify Personal Healthcare Management or the provider about any claims as soon as possible
- Letting us or the provider know of any changes to your business, i.e. primary business activities and location
- To let us or the provider know if a member’s benefit should end
What are the benefits of covering a Key person?
- Rehabilitation support
Including access to services such as a course of physiotherapy.
- Mental health support
This is available to the Key Person and their family.
- Bereavement counselling
A service benefit available to the Key Person and their family.
- Second medical opinion
Access to expert advice and opinions for diagnosis of medical conditions.
- Critical illness support
Help with managing an illness and its treatment.
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