What is ‘key man insurance?’
‘Key man insurance’ means the same thing as key person insurance, and refers to insurance policies that protect businesses from the loss of a key individual – man and woman – who are unable to work due to a critical or terminal illness, or have passed away during the length of a policy.
Put simply, ‘key man insurance’ is where a business insurers itself against the financial loss it would suffer in this eventuality. It’s about giving your stakeholders the confidence that your business can survive and thrive even in the event of losing a key person.
Who is a key person?
A key person could be anyone who is crucial to the day-to-day running of your company, such as director, employee, or anyone whose skill, knowledge, and experience affects revenue. Or, to put it another way, what responsibilities might a key person have? Consider if any loans or financial commitments depend on that person, whether their loss would have an impact on sales, or whether their absence would impact on future planning, for example.
Who can take out key person insurance?
If you own a business – for example, if you’re a limited company director – you can take out key person insurance with the agreement of the person who is being covered. You will need to have a financial relationship with that person.