Key person assurance – protecting your most important assets

July 2018

Insurance is a fundamental component in establishing and running a business. Most business owners are likely to take pains to ensure that they arrange insurance on their buildings, cars and equipment, and are covered for ‘loss of profits’ in the event of a catastrophe such as a fire or flood. Yet many businesses do not insure their greatest asset – the key people who ‘make the business happen’, for life cover. For relatively low costs, it is possible to help the business survive should the worse happen and one or more of the critical people become critically ill or die.

Who are your key people?

A key person within a company could be anybody who is regarded by the business as having a significant impact on the financial position of the company, and whose loss is likely to cause the businesses owners an urgent need to act swiftly to ensure continuity. This could be anyone whose role is “key” to the business because of their expertise, knowledge or contacts. They could also be crucial because of importance to the business; for example, if they own a significant amount of shares in the business. Also, business owners often lend money to their company, and these loans can be taken into account, as well as the servicing of ordinary bank borrowings such as overdrafts, and property loans.

Put simply, a key person assurance is a life or critical illness insurance policy on a ‘key’ person or persons within a business. In the event of death, serious illness or injury, the business can receive a fixed amount of money to buy the business some time to recover. The funds may be used to cover the cost of recruiting and training a new key person, providing temporary staff, or to compensate the business for lost revenue.

Further benefits

If a key person should die, banks are usually in a position to quickly vary the terms for short term borrowings such as overdrafts. With Key Person cover, the business can be in a position where it is able to inject a capital sum at a time of uncertainty, which would give considerable reassurance to creditors, helping the prospects for continuation into the future.
This valuable protection can be secured at relatively low costs.

How we can help

We are specialists in this field and can assist you with all aspects of the necessary arrangements. Contact Graham Smithson, Senior Consultant at Hanover Financial Management, to arrange an initial discussion, without obligation.