Blog
March 17, 2021

Keyperson Insurance, the way to protect your key people.


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“Don’t watch the clock. Do what it does. Keep Going.”

Sam Levenson

In order for any business to ‘keep going’ it needs to ensure that its key people are properly motivated and remunerated for the expertise, value, and insight that they add. But what happens if those key people can’t keep ‘going’? If their stopping has major financial and operational ramifications for the business. If that person became seriously ill or even passed away suddenly, what safeguards do you have in place?

Thankfully, this gap can be bridged to compensate for these unknowns by taking out Keyperson Insurance on those key members of staff that are critical to your business’ success.

What is Keyperson Insurance?

Essentially, it’s a life assurance and or a specified illness policy taken out on the life of an employee by a business who pays the monthly premiums to the life assurance company. This policy type has a number of pseudonyms and can is also known as “Keyman Insurance”, “Key woman Insurance” and even “Business life insurance”.  If the key person who is insured dies, the death benefit is then paid to the company.

What disruption could the loss of a Key person cause?

Depending on the role of the key person within your firm the impact could be far-reaching and encompass a number of disruptions below and beyond:

  • A reduction in profits due to the loss of knowledge the employee brought to their role.
  • The disruption brought to management due to the increased workload of taking on that keyperson’s responsibilities.
  • The calling in of bank loans where the keyperson in question was guarantor or the reduction of credit facilities.
  • The demise of the business where the keyperson played a crucial role in its functioning.
  • A loss of potential contacts known to the keyperson that buoyed the firm’s profitability.

The Benefits of Keyperson Insurance

  • The death benefit provided on the passing of the employee allows the company to have a financial buffer to re-strategize. Similarly, the lump sum payable on a specified illness cover can help bridge a financial gap.
  • As a method to cover recruitment costs where the keyperson is being replaced and it has also been shown to improve retention from a human resources perspective.
  • For the repayment of loans made by the person to the company or loans where they were guarantor.
  • To allow the firm to meet its ongoing expenses and training costs.
  • For peace of mind. It allows business owners and creditors the assurance that their financial position is protected.

What level of cover would a Keyperson need?

This would depend on the size of your business as the amount of cover taken out should equate to the potential loss of earnings the business would suffer as a result of the keyperson’s death or major illness. In general, a multiple of eight to ten times the person’s salary is advisable but this may need to be considered on a case-by-case basis.

Conclusion

As Steve Jobs once put it, ‘Great things in business are never done by one person’, protect your key people today and your business will be cared for tomorrow. Call us today on 01-8455827 to discuss your Keyperson needs or schedule a call back at a time that suits you through our ‘Schedule a meeting’ facility.

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Simply book yourself into an appointment at one of our available times.