Keyman insurance is underwritten very much the same as a normal life insurance product with Guaranteed and Reviewable rates. It really depends on how long you think you will need the policy. If you believe the person you are insuring will be at your company for 10 years then you should take out a 10 year premium guaranteed or reviewable premium. Taking out a shorter premium may mean having to renew it which will normally mean more expense especially if that person has suffered any illnesses. Taking out a longer term premium will guarantee the rates (if you take out guaranteed rates) and means you do not have to renew the policy. You can cancel these policies at any time without penalty so there is no risk of taking or being stuck with a policy if that person leaves the company. Shorter premiums are normally cheaper as the underwriter does not have to calculate the person being that bit older but as mentioned it will be more expensive if you then have to renew the policy.

In the event that a policy is being set up to cover a loan (loan protection) or for an investment, it is often the case that they may stipulate a key man policy to be assigned. This will mean that in the event of a claim the money will be paid directly to the assignee's. If this is the case a bank should be able to provide you with the assignment documentation. The company or employer will still be the legal owner of the policy.

Yes we can arrange a policy to pay out monthly amounts. You may even be more suited to a key man income protection policy.

You can change the owner of the policy through a “deed of ownership”. These are not provided by the providers and would have to be written up through a solicitor. You may need to change the owner of the policy if your company ceases trading or you leave and want to transfer the policy to a personal cover.

Yes critical illness can be added to any key person policy and will be paid to the company in the event of a successful claim.

The cost is dependant on the life assured age, smoker status amount of cover and term. Once a policy is submitted to the underwriter it can be either accepted on standard rates, loaded with an exclusion, postponed or declined. So you will not know the exact price of the policy until you have terms issued.

This depends on age, health and sum assured. Policies over £500,000 normally always require a medical no matter what provider is used.

When a policy is issued at standard rates and the price remains the same as the quote (subject to when its started). A loaded premium is when the underwriter sees fit to increase the premium due to possible health issues or something else that has come to light since the original application. An exclusion is normally related to a critical illness exclusion of one or more of the definitions. For example someone may be excluded for cancer if they have previously had cancer. Policies are sometimes postponed if the underwriter wants to wait for further evidence or for 'cool off' periods since a previous health issue. Policies can be declined for a number of reasons but its mainly down to someone being too high of a risk due to bad health.

Yes, medicals are quite often carried out at home. It all depends on where you live. In some areas of the country, a nurse can visit the applicant at their workplace or their home, whichever is most convenient. In other areas of the country, visits at home or the workplace are not possible and it’ll be necessary to visit a surgery.

Once you have decided to go ahead the next step will be running through an application which entails mainly questions relating to your medical history. This is something we normally carry out over the phone and takes no more than 15 minutes. The application is then submit to online underwriting which will tell us the next step in the process. For someone in good health, below a certain age and below a certain sum assured it can be accepted straight away with terms offered automatically online. If you are happy with the terms, we can start the policy and you can be covered instantly. Unfortunately this is not always the case and for certain age groups and certain higher sums assured there are automatic requests for further information. This can be in the form of a mini screening or full medical and a GP report request. Medicals can be carried out pretty quick and back to the provider within a week or so depending on your availability. GP reports normally take longer and can take up to 3 months. With high sum assured cases there are often further financial requests which are normally just a few extra questions relating to the last 3-year company profits. There is an option to take out instant cover while underwriting is taking place but this would need to be requested and is not always available. However even in the worse case scenario we have been known to have policies up and running within a few weeks. A client who is freely available for a medical and willing to help chase a GP for the medical report is always a plus!

Life Only Key Man Insurance A life only policy is much like a straight forward term life insurance. A person is insured for a sum of money which is paid out on death. The only variation from different providers will be whether terminal illness is also included (which it normally is). Life Only can be taken out with a level term or decreasing sum assured. Life & Critical Illness can be bolted on to the life insurance or taken out on its own (not very often). A 'Life and Critical Illness' keyman cover will pay out a lump sum on diagnosis of a critical illness as set in the definitions of the policy. Over 70% of claims are for heart attack, stroke and cancer. Critical illnesses covered will vary between providers, but most will abide by the rules set out from the ABI. Speak to one of our advisers for more specific information on providers and their definitions. Key Man Income Protection Key Man Income Protection is another option which can sometimes be more suitable. Much like a personal income protection policy, 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. 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. The underwriting is quite strict and there are only a few companies that offer cover. You will need to have more than 2 employee’s and the life assured can not be liable for more than 70% of company profits. Whole of market brokers Being a whole of market broker allows us unrestricted access to quote from all the UK providers. These include companies such as Legal and General, Zurich, AIG and Aviva to name a few. By keeping whole of market access we are able to compare the widest range of options for our clients meaning they get the best options and the cheapest price.

The owner of the policy has to be a UK company although the lives assured do not have to reside in the UK.

Keyman insurance is normally taken out by a ltd company. However it can be taken out by sole traders as a “life of another” policy. The company or person taking out the insurance must have a financial association with the life assured.

Yes LLP’s are treated the same as limited companies when it comes to key man insurance.

Essentially its about keeping the company running and financially stable in the event of a key persons absence due to illness or even worse, death. One of the top reasons for companies going bankrupt (especially small businesses) is due to the loss of a major player within the company. Having a lump sum of money paid to the company in the event of a claim can help hugely to saving the business until a replacement is found or if the person comes back to work.

It really depends on the reason for the insurance. If its to cover a loan or investment then you would normally cover them for that amount. If its straight forward key person insurance then you would need to work out how much that person is worth to the company. Think about loss of profits, cost of replacement and debts that would need to be covered and contingency to keep the company running without that person. Use our calculator to help work out the cover amount.

The policy is taken out by the company to cover an employee so the company owns the policy and is the beneficiary of any claim.

In most cases yes they are, but it really comes down to what the insurance is being used to cover. For example, it may be the case that the premiums are not deductible if the insurance is to cover a business loan. The guidelines on deducting the premiums were originally set our by Sir John Anderson in 1944 who was the then UK chancellor. As normal with these things its always best to speak to a qualified tax advisor or directly to HMRC as these things can be down to interpretation. However we do go into a lot more detail on one of our blogs here.