About Drewberry Insurance
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  • Keyman Insurance

    Protecting your company's most important asset...

    Keyman insurance protects your business against the financial impact of losing a key member of staff.
    Combine critical illness cover and life insurance to protect against the risk of serious illness and death.
    39% of Directors expect to go under within 18 months of the death or serious illness of a key person. L&G 2011
    Speak to our expert independent advisers and compare all of the UK's leading business protection insurers.
    Policies can start from as little as £10 per month.
     
  • What does
    Key Man Insurance cover?

    Keyman Life Insurance

    Should a key person die or suffer a terminal illness (diagnosed with less than 12 months to live) the plan would pay out a lump-sum to the business.

    Keyman Critical Illness Cover

    This option also enables the plan to pay out if a key person were to suffer any one of around 35 to 45 critical illness conditions.

    The most cost-effective method of gaining both types of cover is to take out a combined keyman life insurance with critical illness policy, which would pay out once on the first event of either death or a critical illness.

    Keyman Critical Illness Cover
  • How does
    Keyman Insurance work?

    The policy is underwritten on the key person's life however it will always be owned by the business itself.

    Stage 1:

    The key person dies or suffers a critical illness condition.

    Stage 2:
    The business makes a valid claim with the insurer.

    Stage 3:
    The insurer pays the sum assured
    directly to the business.

    Stage 4:
    Those keyman funds can then be used
    as the business wishes.

    Keyman Life Insurance Claims Statistics
  • Do we need
    Key Person Insurance?

    If the death of a key person would have a significant impact on your business then it is definitely worth considering this protection, especially given the risks involved.

    What is the risk of death?

    Based on ONS life expectancy data (2008-10), the chances of someone passing away within the next 10 years are as follows:

    30 years old
    40 years old
    50 years old
    1 in 112
    1 in 53
    1 in 23

    Research from Met Life in 2012 revealed that 21% of people have suffered long term ill health during their working life so critical illness cover is a very important policy addition.

    Business Protection Statistics
  • Your Key
    Policy Options

    Being Independent Insurance Advisers we pride ourselves on being the experts, knowing every insurance product we offer inside out and back to front. Here's how we work -

    The Fact Find:
    We will talk you through the options available and capture vital information about the person(s) to be covered.

    The Research:
    We go out to all leading business protection insurers to gain the most competitive quotes.

    The Report:
    We email you a short report with our product and insurer recommendations for the various options we've discussed. When you are happy to go ahead in many cases we are able to complete the application for you over the phone.

    Insurance Experts
Unbiased Insurance Advice
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Useful Tools


Business Insurance Infographic
Shareholder Life Expectancy Calculator
Get Group Insurance Quote
Business Protection Question and Answer

Overview


Introduction to key person insurance

Key people are those individuals whose skill, knowledge, experience or leadership contribute to the continued financial success of the business.

In many cases this could be the chairman, managing director or employee with specialist skills although it could be anyone whose death or critical illness could lead to financial loss for the business.

Key Person Protection could provide your business with the cash injection it may need to help recover from this loss of profits, covering costs such as the recruiting and training of a replacement.

Reasons to protect your key people

Often a person's value to the business is reflected in their remuneration package, but whatever their function or responsibility their loss could have disastrous consequences for the business. Some of these may include:

  • Loss of profits
  • The need to recruit or train a replacement
  • Loss of important personal or business contacts
  • Difficulties in meeting existing loan repayments
  • Loss of confidence from suppliers and customers
  • Difficulties in raising finance for new developments
  • Loss of detailed knowledge of the businesses processes and systems
  • Having to repay a loan the key person has made to the business
  • Loss of goodwill

Business protection takes three key forms; protecting profits, corporate debt and ensuring the shares of a deceased business owner can be purchased.

Types of business protection

The success of almost all SMEs are dependant upon a handful of key individuals. The loss of one of these key people could be the beginning of the end for the business. A number of the larger UK insurers have thus created a range of products to help protect youe business against such a loss.

Life Insurance Only

A lump sum payment should the key person pass away or become terminally ill during the term of the cover.

Critical Illness Cover Only

A lump sum payment if the key person is diagnosed with one of a list of defined critical illnesses during the term of the cover.

Life and Critical Illness Cover

A lump sum payment should the key person either pass away, become terminally ill or suffer one of a defined list of critical illnesses during the term of the cover.

Keyman Income Protection

A monthly income if the key individual is unable to undertake their role due to illness or injury during the term of the cover.

The research

A 2011 study by Legal & General carried out with the Institute of Directors took place to understand the security of assets, shares and cash flow of businesses with some of the highlights detailed below.

  • 95% of businesses had at least one key individual.
  • 38% of business owners expected their business to fold within 18 months of the death or critical illness of a key person.
  • 58% of businesses had no formal agreement to establish what would happen in the event of the death or critical illness of a business owner.

Key Person Insurance Graphs

How much is a key individual worth?

This will depend on the type of cover in question, generally speaking the level of cover will reflect the cost to the business in terms of profits and associated costs in losing the key person.

In the case of a sales director the total cover may equal the amount of profit typically generated by the sales director, additional costs can also be covered including the costs associated with the replacement of the director such as recruiting and training another individual to the same level as the lost key person.

Taxation of keyman insurance

When it comes to key person protection policies there is no direct legislation on the topic which means you should always consult your inspector of taxes to ensure the correct treatment of any premium and benefit payment.

As a general guideline there tends to be a tax liability either on the way in or the way out with any protection insurance policy. What we mean by this is if tax relief has been allowed on the premiums then any benefit payable would be taxable.

If the premiums have been taxed at the outset then any benefit payable is likely to be paid tax free. This is a very broad and general statement and much will depend on the judgement of the local tax inspector.

Business protection trusts

A trust is often set-up to ensure any benefit payment is distributed to the beneficiary as quickly as possible, it is also used to ensure a benefit payment does not form part of estate of the deceased and thus result in a potential Inheritance Tax Liability (IHT).

A key person protection plan is an insurance policy paid for by the organisation on the life of the key individual. Where the business is a company, LLP or Scottish partnership given the nature of the relationship between the business and the key individual a trust is not typically needed. The protection policy is often simply set-up on a 'life of another basis'.

Looking for advice

This overview will provide you with a high level understanding of the importance of protecting your business and it's key individuals. Should you require further information, advice or guidance please do not hesitate to give us a call on 0800 612 7897 or email us at enquiries@drewberryltd.com.

Client Reviews
30/07/2014  qwBoyle239

Helpful, friendly and patient!
I had been browsing for possible quotes on life and income insurance and came across Drewberry. My advisor was very friendly and patient...


28/07/2014  Londonp61

Very Professional!
Very Professional and pro-active. Listen to your specific needs and provide what is best suited for you...


23/07/2014  DMLtd

Critical Illness Cover
I found the staff to be extremely helpful. They explained to me the different types of cover available...

Publisher: Drewberry

Frequently asked key person insurance questions


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I have been doing some research into key man protection and have not come across whether such cover should be written into trust for tax purposes?
I keep hearing people talk about key man insurance but what does it actually cover?
I am a company director and have been made aware of both Keyman Insurance and Relevant Life Insurance however I am a bit confused as to what each of them does?
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We would love to hear from you, whether you are enquiring about our services, a career, or a business partnership.

  enquiries@drewberryltd.com
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  020 8432 7333
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Published by Andrew Jenkinson
Financial Services Authority