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What is Key Man Insurance?

Key Man Insurance is a policy taken out by a business to insure their most valuable employee’s (key people).

The policy is designed to protect the company from the financial impacts of losing their key people through death or illness. The business owns the policy and is the beneficiary of any payout.

Policies can be taken out as a life only insurance or with critical illness included. The benefit is a tax-free lump sum which is paid to the company in the event of a claim. The cover is taken out over a term, normally a 5 year or 10 year guaranteed premium depending on how long you think it’s needed. All policies through us can be cancelled at any time without penalty or tie ins.

According to statistics, only 28% of UK business’s established in the last two years have any kind of business protection in place. Yet 46% would cease trading immediately if a key person died.

Who are my Key Personnel?

Your company could have various workers essential to profits. A key person is not always the top sales person or “bread winner”.

A key person could be the brains behind the operation. Maybe someone who knows the design mechanics or engineering details of the main product. Maybe the creator of the intellectual property, the invention, discovery or design. Many of the people we insure will be directors and managers. But as far as the underwriter is concerned, as long as there is an insurable interest its reasonable for that person to be considered.

Typical key people will be:

Everyone within your company will be linked to profits and as a result be absolutely essential. Companies will always make sure they insure expensive machinery and other company assets.  Therefore wouldn’t it be wise to insure your most valuable assets, the key people?

How much is Keyman Insurance?

The cost of key man insurance is based on each individual life assured. It’s calculated much like normal life insurance.

So premiums will depend on how old the person is, if they smoke, the amount of cover and the term. All quotes are subject to underwriting which means premiums could go up before terms are issued.

Any increase in premiums could be down to a number of things. Previous medical history can cause an increase, but often its down to a high BMI (Body Mass Index) or raised blood pressure. Taking part in hazardous leisure activity or dangerous duties at work can also have an effect. It’s a good idea to tell us any issues up front as there are providers more lenient on certain medical history or leisure activities. Free free to use our BMI calculator and see if your premium could be loaded or fill in our form to compare key man insurance quotes.

Calculating Key Man Cover

The sum assured for a key person is really down to the individual business. What would the financial repercussions be tomorrow if that person was no longer around?

Most of the time a business owner will look at the turnover of the company and work out a percentage that the key person brings to the company, then insure for that amount. But it’s worth thinking things through a little more. You can use our key person calculator.

  • Covering loss of profits
  • Cost of hiring a replacement
  • Keeping all bills and loan repayments covered.

Losing a key person can have many detrimental effects to the company which can all contribute to the business’s well being. Contracts still need to be honoured and customer confidence will need to be maintained. Key people often have all the client relationships and the know how of the business. So all things considered a financial injection from a policy pay out will help, but some extra thought and contingency planning can also go a long way.

Tax Treatment

For most people the above will suffice. If you want to know more regarding how HMRC treat Keyman Insurance, please visit our in depth guide.

The two most common questions we are asked regarding Key Man insurance tax treatment are:
Can the premiums be off set against corporation tax? – Yes, they can. The company owns the policy and pays for the premiums. These premiums are tax deductible.
Is a lump sum benefit tax-free? – Yes, it is, Its paid tax-free to the company. It’s then liable to tax like any other amount of money from a company.
For most people, the above will suffice. If you really want to know more regarding how HMRC treat Keyman insurance then please visit our in depth guide

Why Choose Us?

You deal directly with us we do not pass on your details to any third parties.

  • Established in 2008 we are the longest serving business protection
    specialist in the UK.
  • FCA authorised advisers with years of experience in business protection.
  • We are a whole of market broker able to compare key man insurance quotes from all the UK providers.
  • We GUARANTEE to beat any price.
  • Free trust set up.
  • 5 Star Trust Pilot reviews, our customers love us!

Our Customers Love Us!

What people are saying about us, the My Keyman Insurance process and their satisfaction.

Our Customers Love Us!

  • Simple and Low Cost

    Everything was made very easy to understand. The quotes were the cheapest we found too. Very happy!

    Rating
  • Excellent Service

    Everything was made very easy. It was great Jody.

    Rating
  • Great Work!

    Great prices and good advice, what more could you want.

    Rating
  • Recommended!

    A very good service thanks...

    Rating
  • Excellent service with easy to understand explanations

    Jody Pearmain of Keyman was very helpful in explaining options and I thoroughly recommend his company

    Rating
  • Good for key man insurance

    Great service and easy to understand. Would use again.

    Rating
  • Fantastic!

    Over and above what we expected. Thanks!

    Rating
  • Would recommend!

    Did everything we wanted very well. Decent price and made easy..

    Rating
  • We received a wonderful service from…

    We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the best we found too.

    Rating
  • The services received was great

    The services received was great. Many thanks to these professionals at mymainsurance. I will definitely use them again.

    Rating
  • First Class Service

    The standard of service from MyKeyMan was first class. They kept me up to date with progress on my Relevant Life Policy, followed up promptly following delays caused by my medical practice being slow in compiling reports, and responded instantly and clearly to any questions I had.

    Rating

Meet Our Team

Our dedicated team are here to offer you expert FCA qualified advice along with 1st class support to make sure the process is fast and simple.

meet our team

Jody Pearmain
Jody Pearmain

Managing Director & Founder (My Key Finance Ltd)

Lori Norton
Lori Norton

Administration Manager at MyKeyManInsurance.com (My Key Finance Ltd)

Tyler Pearmain
Tyler Pearmain

Senior Keyman Insurance Adviser at MyKeyManInsurance.com (My Key Finance Ltd)

Keri Gardiner
Keri Gardiner

Customer Service & Website Admin at MyKeyManInsurance.com (My Key Finance Ltd)

Key Person FAQ

It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout.

How long should we insure our key person for?

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.

Can the policy be assigned?

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.

Can we take an income as appose to a lump sum?

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

Can The Owner Of The Policy be Changed?

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.

Can we add critical illness to a key man insurance?

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.

How much does Key Man Insurance cost?

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.

Will I have to have a medical?

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

What can the terms be?

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.

Can a medical be carried out at home?

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.

How long does it take to set up a policy?

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!

What Options Do I Have?

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.

Does it have to be a UK company to take out the cover?

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

Who Can Take Out A Key Man Policy?

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.

Can an LLP take out Key Person Insurance

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

What is the purpose of 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.

How Much Should I Insure the person for?

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.

Who Owns The Policy?

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.

Is Key Man insurance tax deductible?

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.

My Key Man Insurance

UK’s Number One Business Protection Specialist.