Key Person Income Protection Insurance | Everything you need to know
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Key Person Life Insurance
How would your business cope with the loss of a key person? We help protect your business from the death of its key people.
Shareholder Protection Insurance
The death of illness of a minor or major shareholder can lead to massive business problems. Help give shareholder dependents a fair sale price of shares and help remaining shareholders retain the business shared with these important policies.
Business Loan Insurance
Many businesses borrow to grow or invest in expensive machinery or premises. On the death of a director banks often get worried and cancel overdrafts or call in loans. Business loan insurance protects your business from this issue.
Executive Income Protection Insurance
In the event of a long term or permanent illness where a director cannot work anymore then paying their wages can become a burden on the business. Executive income protection give the company the required funds to ensure the director can still be remunerated.
Relevant Life Policy
Key Person Income Protection Insurance
Long term illness of a key person can affect both the income of a business and also in many cases the employee also needs paying. Key person income protection can cover the business for loss of income whilst the employee is not working.
Key person income protection insurance
When one thinks about key person insurance they usually think it covers a lump sum is a key employee dies. However the risk of death is generally a lot less probably that the risk of becoming sick either short or long term. In addition if key people do become ill long term then the employer is often committed to paying wages. To protect against this risk business owners and limited companies can take key person income protection to provide a monthly income to cover both loss of profit and the salary of the employee.
Here’s How We Work
- You can either request quotes or contact us to discuss the protection you need.
- We’ll provide you with competitive and customized solutions that cater to your specific requirements.
- Once you give us the green light, we’ll take care of all the paperwork and even put the policies in trust if required.
Who is a Key Person?
Key persons are an integral part of any business. They bring together their unique skills, knowledge and experience in order to help a business reach its financial goals. These key persons also provide vital leadership, managing different aspects of a business’s operations, such as finance, marketing and human resources. Their dedication and expertise can be indispensable for a company’s success.
At all levels of an organization, key persons may exist. For instance, the CEO or president is often seen as a key person because of their strategic vision for the company as well as their decision-making capabilities. At the management level there are also other key individuals who contribute to successful operations, guiding teams and departments toward achieving various objectives. Other roles include department heads or supervisors whose oversight drives successful outcomes; project managers who specialize in organizing projects; and engineers responsible for creating products. Having these knowledgeable individuals on board is critical to help businesses remain competitive in an ever-changing world of technology and innovation.
Options Available with Key Person Income Protection
It is important to seek independent advice to make sure the financial impact of short or long term sickness of key employees. Various options existing and some maybe driven more by budget rather than needs. Therefore we recommend a full fact find where we can prioritize high risk areas.
- Term – care should be taken when deciding on the term of a policy. Typically the policy should be set up to match the employees planned or expected retirement age.
- Deferred period – This is the length of time that the employee needs to be ill or sick for before the insurance policy starts to payout. This can vary between 1 months and 12 months. The longer the waiting period the less the premiums. However it is also important to ensure the business has sufficient cash flow to match the waiting or deferred period.
- Level or Increasing – A £1000 today will not be worth the same in 10 years time. Thus key person insurance policies have the option to increase the monthly sum assured each year at a set amount or inline with inflation where the retail price index is usually used. However it must be noted that the premiums each year will also increase.
- Definition of Incapacity -Definition of incapacity is an important factor when taking out a key person income protection policy. This defines what ‘incapacity’ means and how it will affect the employee’s ability to earn an income. Generally, it is based on the inability of the employee to do their own job due to illness or injury. The definition will determined when the policy is offered terms. Other definitions may include an inability to do any job or a combination of both.
Tax Considerations
Key Man Insurance is a type of insurance policy designated for the recovery of business costs under the event of loss or death of an important person within a company. This type of policy typically covers the cost associated with replacing key personnel, training and recruiting new individuals needed to keep operations running smoothly, as well as protecting against lost revenue.
HMRC views Key Man Insurance policies as tax-deductible expenses if they are acquired solely for needs of the business. It’s important to note that personal insurance policies may not be considered deductible and therefore require special attention when looking into acquiring such a policy. We recommend that you seek guidance from a tax expert before taking out any sort of insurance policy to make sure you’re avoiding any extra taxes in the process.
Key person insurance is an invaluable tool for businesses, providing financial protection against the loss of their key employees. In certain circumstances, the company may be allowed valuable tax relief on the premiums associated with taking out a key person insurance policy. To qualify for this, the policy must be contracted for a set term, typically no greater than five years but in some cases up to fifteen years may be permissible under HMRC rules. This stipulation ensures that funds are directed towards policies of short duration rather than those intended to cover significant periods of time. Such policies can provide protection to cover significant income losses resulting from the death or critical illness of a key employee, enabling companies to recoup what could otherwise be very substantial costs incurred when looking to replace such personnel.
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If you have any questions or would like to learn more about our business protection insurance products and services, we invite you to contact us today. You can reach us via email or by phone.
Don’t wait until it’s too late. Contact us now to learn more about how we can help you protect your business and secure your future. We look forward to hearing from you soon!