The Different Types of Key Man Insurance
There are various options you can look at when taking out a key man insurance policy. It all depends on what you want to achieve with the policy and of course how much budget you have. Different companies have different needs and its all about finding the right policy to suit your business. Below we discuss some of the options. Of course we would always recommend you speak to an advisor to help decide what’s right for you.
A key man life only insurance policy is much like a straight forward term life insurance policy. A person is insured for a sum of money is which is paid out on death. The only variation from different providers will be whether terminal illness is also included which it normally is. Check with your advisor. A life only key man policy can be taken out with a level term or decreasing sum assured. As mentioned it’s normally over a term of up to 40 years depending on how old the key person is.
Critical illness can be bolted on to the life insurance or taken out as a separate policy. Different insurance companies vary quite a lot on definitions or illnesses covered within their policy. So its important to check the key facts document or policy summery for full details. Most companies will offer the same critical illness definitions with a key man policy as they would with a personal critical illness. Pru-Protect are slightly different in that their cover is different for business protection and it does not reach the guidelines set out by the ABI (Association of British Insurers). As its business protection its more specifically targeted at illness’s that will keep a key person from working. It’s worth a discussion with your advisor for more details as it may or may not be more suited for your key man insurance needs. Much like life insurance a critical illness policy will pay out a lump sum on diagnosis of a critical illness as set in the definitions of the policy. In general most claims are for heart attack, stroke and cancer. But there are normally anything between 30 to 40 different critical illness definitions covered. Speak to one of our advisors for more specific information on providers and their definitions.
Key Man Income Protection
Key man income protection is another option companies may have which can sometimes be more suitable. Much like a normal income protection policy and key man income protection will pay out a monthly income to the company in the event that the life assured is unable to work due to sickness or injury. Key man income protection policies are normally taken out on a shorter term and the benefit pay-out is normally limited to 12 to 24 months. There is also a set deferred period of no less than 4 weeks which means the key person would need to be off work for at least 4 weeks before the benefit would start to pay out. After underwriting this can often be extended. Key person income protection is often quite difficult to get as the underwriting is very strict and there are few companies that offer it. We have also found that its quite rare that a company will get the cover they originally applied for so it’s sometimes not taken up. Of course this is not always the case. Our qualified advisors can help you determine whether an income protection key man policy is right for your company.