How to Value Your Business for Insurance Purposes
We’ve found that, whatever business our clients may be in, the one thing no company owner wants to think about is how the death or illness of a key worker will impact their business. This can complicate the process of calculating the right level of cover.
Increasingly, it can be external investors or lenders that help to define the level of cover that is required.
Some will require a benefit that’s at least sufficient to protect the value of their investment. More demanding investors might also want to see their projected returns covered too.
Even so, it often comes down to the business itself to decide who its key people are and upon who it depends most.
Valuing A Business For Key Man Insurance
One broad rule of thumb is that a key person should be covered up to either twice their contribution to gross profits or five times their contribution to net profits, but this isn’t a fixed formula.
The value of your Keyman Insurance policy will depend on your business and the people you’re insuring, which is why it’s always best to get expert advice.
If you need help we provide independent fee-free advice. You can speak to one of our expert advisers on 02074425880 or email firstname.lastname@example.org.
How Much Does Keyman Insurance Cost?
There are a number of factors that will determine the cost of keyman cover. Some of the key policy factors you can control, for instance:
- Amount of cover
- Length of cover
- Including critical illness insurance.
Others are personal factors that you have less control over, for example:
- Current state of health
- Smoker status
- Lifestyle and hazardous activities
- Family history.
Average Cost Of Key Person Insurance
We have calculated examples of the monthly cost of Keyman Insurance. In the table below, we split this out into Life Insurance and Life Insurance with Critical Illness Cover for a healthy non-smoking individual aged 35, 45 and 55.
They’re looking for £150,000 of level cover (i.e. cover that will remain fixed throughout the policy term).
Use our Keyman Insurance calculator to compare instant online quotes from the UK’s leading insurers including AIG, Aviva and Legal & General 🧐.