Key Man Insurance

Can the policy be assigned?

In the event that a policy is being set up to cover a loan, the lender will often ask that the policy be assigned. This will mean that in the event of a claim the money will be paid directly to the assignee’s. The bank or lender should be able to provide you with the assignment documentation. The company or employer will still be the legal owner of the policy.

What Extra Options Do I Have?

Life Only Key Person Cover
A life only policy is much like a straight forward term life insurance. 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 normally always included. Life Only can be taken out with a level term or decreasing sum assured.

Life & Critical Illness
Critical illness cover can be bolted on to key man cover or taken out on its own. 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.

Key Man Income Protection
Key man income protection is another option which can sometimes be more suitable. It will pay out a monthly income to the company in the event that the life assured being unable to work. This could be 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.  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.

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.

Can we add critical illness to a key person insurance?

Yes critical illness cover can be added to any key person protection policy. This is something we advise to do. Any pay out will be paid to the company in the event of a successful claim.

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.

How long should we insure our key person for?

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, you should take out a 10 year policy. A 5 year policy will be cheaper in the short term but will need to be renewed if the person is still at the company. Thus a person now 5 years older will be more expensive to insure.

You can cancel key man cover at anytime without penalty so there is no risk of being tied in to a policy you no longer need.

Who Can Take Out A Key Man Policy?

Keyman person cover 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.

Who is the owner and who is the beneficiary of a key person life insurance policy?

The company owns the policy and is the beneficiary of any claim.

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.

What can the terms be?

When a policy is issued at standard rates and the price remains the same as the quote. A loaded premium is when the underwriter see’s fit to increase the premium due to possible health issues or something else that has come to light since the original application.

A critical illness exclusion is something that can be added to the terms once offered. 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. In some cases policies will be declined totally.

Can a medical be carried out at home?

Yes, medical 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 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. This entails mainly questions relating to your medical history. normally carried out over the phone but can also be filled in online. The application is then submit to underwriting which advise of the next step. For someone in good health, it can be accepted straight away 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. There are automatic requests for further information for older age groups and higher sums assured. This can be in the form of a mini screening or a request for medical information from the GP. Medicals can be carried out pretty quick and back to the provider within a week. GP reports normally take longer and can take up to 3 months.

With high sum assured cases there are often further financial requests. This is normally a few extra questions relating to the last 3 year company profits.