Key Person Cover
Have you considered how your business would manage financially should a key person become seriously ill or pass away?
A key person can be anyone that is deemed to be critical to the success of your business, especially where that person holds critical knowledge, manages partnerships, relationships or negotiations.
This could be a Business Owners, a CEO, a Sales Director, Department Heads, or anyone who’s experience, skills and knowledge affect business revenue.
If one of these key people were to be removed from the business tomorrow without a suitable replacement in place, have you considered what kind of impact this might have on your business?
This kind of scenario could impact a business in a multitude of ways. It could potentially hinder business growth or delivery of business strategies. Customers and other businesses you work with could potentially lose confidence in your business. It could lead to loss of important contracts and income.
Losing a key person can impact a business in many different ways, all leading to a potential loss of revenue.
What is Key Person Cover?
Key Person Cover, also known as Key Man Cover, helps to protect a company against the financial impact of a key person within the business becoming terminally ill, passing away, or suffering from a critical illness (if critical illness is added to the policy).
This type of policy would pay out directly to the business and could ultimately assist the business to continue trading and potentially cover any loss of profits also.
With this type of policy, the business owner insures the business against the financial loss they would incur should this scenario ever occur, and provides stakeholders with a level of comfort that the business should survive if a key person became seriously ill or passed away.
How does this kind of policy work?
The policy is taken out to cover a key person in the business in the event that they pass away or suffer from a serious illness, and in this scenario, a lump sum payout is made to the business. The policy is owned by and paid through the business, and any proceeds from a policy pay out is also paid directly to the business
When should Key Person Cover be taken out?
Key Person Cover can be taken out at any time. A new company may be dependent on the skills and knowledge of one or two people within the business in order for it to become a success. The loss of one of these key people could potentially have a devastating impact on the business, whereas a larger and more established organisation may potentially have more resources and be able to replace a staff member relatively quickly. Each situation will be completely unique.
More established businesses could have higher fixed costs such as premises, staffing costs, general running costs and other high costs such as business loans, therefore losing a key personal that impacts revenue for the business could potentially have a huge impact on the business.
Why should I consider this type of cover?
Key person cover can help to protect your business in the event of a serious illness or the death of a key person within the business. The lump sum that is payable can help to mitigate against the loss of their leadership, skills, experience or knowledge.
In this scenario, an injection of funds into the business could cover any potential downturn, or it may assist in covering the costs of finding and hiring a suitable replacement, as this process alone can take time due to the interview processes, notice periods and simply being able to find a suitable replacement that will suit the business and perform as well as the previous key person did.
What does Key Person Cover protect?
A payout from a policy not only helps to cover the costs of replacing a key person, it can also assist with general business continuity when a key person is absent.
Having this kind of cover in place also provides peace of mind and comfort to existing staff knowing that there should be no major disruption to the business while a suitable replacement is found.
If you are a Business Owner and considering Key Person Cover, please get in touch with our specialist.
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