Key Man Insurance
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The UK’s Ultimate Guide To Key Man Insurance
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What is Key Man Insurance?
A Key Person Insurance policy is taken out by a business to insure the most valuable members of staff.
A key man insurance policy is designed to protect the business from the financial impacts of losing their key people through death or illness. It’s essentially a life plan set up with a company as the owner and as the beneficiary.
Keyman insurance can be taken out as a “life plan” covering death only or with critical illness cover 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.
Key Person Insurance policies can be cancelled at any time. You are not tied in.!
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.
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Who in my company will need Key Person Cover?
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 key 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 key person to be considered. What would your company do if you lost your most important key person? Is there anything more important when protecting your business than the people?
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 term life insurance.
The monthly 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.
There is almost always someone within the business that is very important. Is there someone in company the with all the contacts and years of built up relationships? Who is the face of the company or the personality that everyone knows and trusts. Is there a specific person with “the brains” behind the whole project? What about the project manager overseeing your next big investment?
If one of the above relates to your company then you need to think seriously about key person insurance and what would happen in the event of their death or illness.
How Much Keyman Insurance Do I Need?
The amount of cover you need for key person cover is really down to the individual business. For example, if that person brings £100,000 per year to the company then maybe that’s the sum assured needed.
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.
Losing a key member of staff can have many detrimental effects to the company. Customers will still expect contracts to be honoured and their confidence in your business will need to be maintained. So all things considered a financial injection from a policy pay out can help enormously. It can give the company breathing space for contingency planning and working out what to do next.
Is Keyman Insurance a Business Expense?
In most cases key person insurance will be treated as a business expense and is therefore tax deductible.
The two most common questions we are asked regarding Key Man insurance tax treatment are:
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.
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Everything was made very easy to understand. The quotes were the cheapest we found too. Very happy!
Everything was made very easy. It was great Jody.
Great prices and good advice, what more could you want.
A very good service thanks...
Jody Pearmain of Keyman was very helpful in explaining options and I thoroughly recommend his company
Great service and easy to understand. Would use again.
Over and above what we expected. Thanks!
Did everything we wanted very well. Decent price and made easy..
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.
The services received was great. Many thanks to these professionals at mymainsurance. I will definitely use them again.
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.
Meet Our Business Protection Team
Our dedicated team are here to offer you expert FCA qualified advice. We offer 1st class support to make sure the process is fast and simple.
Managing Director & Founder (My Key Finance Ltd)
Administration Manager at MyKeyManInsurance.com (My Key Finance Ltd)
Senior Keyman Insurance Adviser at MyKeyManInsurance.com (My Key Finance Ltd)
Customer Service & Website Admin at MyKeyManInsurance.com (My Key Finance Ltd)
Key Person Insurance FAQ
All you need to know and more.
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.
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.
This depends on age, health and sum assured. Policies over £500,000 normally always require a medical no matter what provider is used.
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.
Yes we can arrange a policy to pay out monthly amounts. You may even be more suited to a key man income protection policy.
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.
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.
The company owns the policy and is the beneficiary of any claim.
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.
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.
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.
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.
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