Key Person insurance or previously commonly known as ‘key man insurance’ is a policy taken out by a business as protection to the loss of a key person either through death or serious illness. Both life and critical illness can be covered.
The policy is designed to payout to the business following the financial loss of the individual having capacity to work within the business.
In the event of serious illness or death and the person as a result being unable to work; you must assess the impact on your business. The impact can be in a number of ways, revenue generation from a top salesperson, owner of the business and therefore banks calling in loans or a technical expert that maintains the infrastructure of the business resulting in inability for the business to operate.
Ultimately it would apply to any valuable person in the business that would result in financial loss or significant value-loss to replace the individual. Often roles covered are as follows:
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