11 Purdeys Way, Rochford, England, SS4 1ND
Key Person Insurance pays a lump sum to the business if an insured director or key employee dies or becomes seriously ill. It can help replace lost profit, protect borrowing commitments and give the company time to recover.
Key Person Insurance pays a lump sum to your business if a key director or employee dies or becomes seriously ill — helping protect profits, borrowing and business continuity.
Who brings in the work, looks after your biggest clients or has the knowledge everyone else relies on? If that person died or became seriously ill, the bills would still need paying. Key Person Insurance gives the company money to help cover the gap while you find a way forward.
59% of businesses surveyed believed they could not keep trading for a full year after a key person’s death or critical illness. Source: Legal & General, State of the Nation research (2021). Read the research finding.
The tax position depends on why you take out the cover and how it is arranged. Qualifying premiums can reduce taxable trading profits, but you also need to consider tax on a payout. Our Key Man Insurance tax guide explains both.
It’s not about job titles. A key person is someone whose loss could seriously affect revenue, operations, borrowing or important client relationships. If the business would struggle to replace them, they may be worth protecting with key person insurance.
These are often the people who drive the business, maintain important relationships and give lenders or clients confidence. Their loss could affect revenue, borrowing and the company’s future direction.
A successful salesperson may be responsible for a significant share of turnover or hold relationships that are difficult to replace. Losing them could quickly affect new business and cash flow.
Some employees hold specialist knowledge, qualifications or technical expertise that the company depends on. Recruiting and training a suitable replacement may take considerable time and money.
The people managing finance, suppliers, systems or day-to-day delivery can be essential to business continuity. Their loss may cause disruption across several parts of the company.
The short answer: as soon as the business depends on specific individuals for revenue or continuity. The more concentrated that dependency, the more pressing the case.
A few situations that tend to come up: a director personally guarantees the company’s borrowing; one salesperson brings in more than 20% of annual turnover; a technical lead has no internal successor; or a founder’s client relationships sit in their personal network rather than the company’s CRM. Any of these is a reasonable trigger to look at key man insurance in the UK properly.
It’s also worth reviewing Shareholder Protection Insurance at the same time if you have multiple owners. It’s a different type of business protection policy, but the two often make sense to sort together.
We’ve been arranging key man protection for UK businesses since 2008, helping company directors understand their options and put appropriate business protection in place without unnecessary jargon, pressure or delays.
As an FCA-regulated broker (FCA registration 628996), we compare cover from a broad panel of leading UK insurers including Aviva, Vitality, Legal & General, Royal London, LV=, and Scottish Widows. You talk directly with a qualified adviser who understands key employee life insurance and the tax and commercial considerations that matter to limited company directors.
No call centres. No referrals to someone else. You get one adviser, a straight conversation, and a recommendation that’s actually tailored to your situation.
The company takes out a policy on the individual, pays the premiums, and is the named beneficiary. Simple enough.
If the insured person dies during the policy term, or if critical illness cover is included and they’re diagnosed with a qualifying condition, the insurer pays a lump sum straight to the business. No trust, no waiting for probate, no family complications – the money arrives where it’s needed.
The sum insured is usually calculated as a multiple of the person’s salary, their contribution to profit, or the estimated cost of replacing them. We work through that with you as part of the key person insurance quote process, using a straightforward calculator to get to a sensible figure.
Not sure which type of cover your business needs? Use our Key Person Insurance Calculator to get an instant estimate of the cover amount – no personal details required.
Key person protection can be structured in a few different ways depending on what risk you’re most concerned about. For how this fits alongside ownership cover, see our Key Person vs Shareholder Protection guide.
Life and critical illness benefits can be combined; Key Person Income Protection is a separate type of policy. We’ll talk through which makes more sense for your business.
For company-owned cover, the payout is paid to the business. Depending on the policy’s purpose and any lender arrangements, it can help fund:
What ties all of these together is time. Key person business insurance buys the business time to adapt without being pushed into selling assets, taking on expensive debt, or making hasty decisions under financial pressure.
Key person insurance is priced very similarly to personal life insurance policies, as it depends on the individual insured and the level of cover required. However, the structure, purpose, and tax treatment can differ significantly.
For company directors, it is also worth considering alternatives such as relevant life cover, depending on whether the protection is for the business or the individual’s family.
Insurers assess age, health, smoker status, occupation, and policy term to calculate premiums.
Older age increases premiums. Taking cover earlier keeps costs lower.
Medical history and lifestyle impact underwriting and pricing.
Smokers pay significantly more due to increased health risks.
Higher-risk roles or reliance on the individual can increase cover levels.
Male, non-smoker, born 01/01/1981, term to age 67.
| Cover | Life Only | Life & Critical Illness |
|---|---|---|
| £100,000 | £11.81 pm | £68.03 pm |
| £250,000 | £22.25 pm | £159.30 pm |
| £500,000 | £45.37 pm | £313.93 pm |
| £1,000,000 | £84.32 pm | £576.39 pm |
Key insight: Life cover is relatively low cost. Adding critical illness increases premiums significantly but provides protection if the key person survives a serious illness.
Jody Pearmain, Director of My Key Finance Ltd
“In my experience, premiums can vary significantly between insurers for exactly the same person. It’s not just about price — it’s about structuring the cover correctly so it genuinely protects the business when it matters most.”
Four decisions that help turn a rough idea into cover that fits your business.
Think about the profit you could lose, the cost of a replacement and how long the business would need to recover. Salary or turnover alone may not tell the whole story.
Estimate your cover amountLife cover protects against death. Critical illness adds cover for conditions that meet the policy definitions. A prolonged absence may call for a monthly benefit instead.
Explore Key Person Income ProtectionConsider how long the business expects to rely on the person, together with succession plans or a financial commitment. Review the cover when their role or your business changes.
Key Person cover protects the business. Relevant Life provides family benefits through a trust. Shareholder Protection helps fund a share purchase.
These are different needs; you may need more than one arrangement.
Have the person’s date of birth, smoking status, role, cover amount and term ready. We’ll help you work through the options.
My Key Finance Ltd is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference Number 628996.
It is not generally a legal requirement. A lender or investor may require cover as a condition of finance or investment, so check the relevant agreement.
Premiums can qualify where the policy meets HMRC’s trading-purpose and policy-structure conditions. Protecting capital interests can lead to a different result. Payout taxation is a separate question; not claiming premium relief does not guarantee a tax-free claim. Read our Key Man Insurance tax guide and confirm your position with your accountant.
For company-owned cover intended to protect the business, the company normally receives the payout directly. A family or shareholder trust serves a different purpose. Check the ownership and beneficiary arrangements before applying.
Review whether the business still needs the cover and what the policy permits. Cancellation or a change of ownership may be options, but a transfer is not automatic and can have tax consequences. Discuss it before making changes.
Read the terms offered for the individual policy. Exclusions, medical underwriting and definitions vary. Do not assume that every pre-existing condition is excluded or that every diagnosis qualifies for a critical illness payment.
Some applications can be accepted quickly. Medical evidence, financial checks or a GP report can extend the process. We can explain what evidence is outstanding, but cannot guarantee a completion date.
Cover is usually arranged separately for each person, reflecting their role, health and the financial impact of losing their services. An adviser can check the policy structures available for your business.
The insurer will explain the evidence required, such as a death certificate or medical information, policy details and any relevant business evidence. Requirements and payment times depend on the claim; contact us for help with the process.
