Keyman insurance is one of the most overlooked insurances for business – but also one of the most important. This article looks at the risks it can cover for Directors, Shareholders, partners, and employees alike.
As a businessman, you may have third party liability insurance and ensure your buildings, stock, and vehicles. As a businessman, you may even have professional liability insurance and third-party liability insurance. Is that all you need? What about your other primary assets – your most important personnel?
Key personnel is at the heart of any business, but no more than the 3.9 million small, often family-run businesses in the UK employing up to 4 people. Long-term absence due to serious illness or even death can be a terminal point for some of these businesses. The risks are the same for limited liability companies, partnerships, and sole proprietorships.
In this context, Keyman Insurance is a must. Keyman Insurance represents a group of insurance plans, all of which are designed to protect the company financially against the consequences of long-term illness or even death of personnel who are central to the company’s prosperity. The insurance cannot replace people but can provide money to buy time and cover the costs of temporary staff, recruitment, loss of profit, or a cash injection.
Table of Contents
The insurance falls into four categories
Insurance to help your business recover during the extended period when your key personnel cannot work or to train or recruit a replacement, insurance to protect profits, insurance to protect shareholders or partnership interests, and insurance for anyone involved in guaranteeing business loans or banking facilities.
Keyman insurance for those at the heart of your business.
Who are your key people? They are the ones who direct, create, and run your business. The people without whom your business would lose sales and profits or without whom even the fundamental viability of your business would be shaken. Look at the directors, partners, owners, and more. Consider the roles of senior managers in sales, technical development, and operations – the roles will change in any business, but the candidates will stand out.
Make sure these people provide the extra money needed to hire temporary staff or hire and train a replacement.
Keyman insurance to protect your profits.
The loss of key personnel goes far beyond the cost of their salary and the cost of replacement. Because they are central to the prosperity of businesses, their loss will get to the bottom. You can also ensure your loss of profit!
Keyman Insurance to protect shareholders or partners.
We are talking about insurances to protect interests in the event of long-term illness or death. Families may want to sell their interest in the company, but the remaining members of the company may not want those interests of newcomers. Keyman insurance arrangements can be implemented that provide the necessary financing to buy the shares of the original shareholders or their legacy.
Keyman Insurance insures those who offer personal guarantees.
When a company takes out a loan or raises bank finance, the lender will likely require a personal guarantee or a levy on its personal property. This is especially true for small and new businesses. So what happens if these guarantors fall seriously ill or die? The lenders may be able to repay the loan. What happens then? Again, Keyman Insurance is the answer. Insurance can be structured to pay off the loan and thus protect the company and the family of the guarantor from major concerns.
Most of the UK’s leading insurance companies offer Keyman Insurance as a development of their life and life insurance interests. They have all the necessary paperwork available to implement the cover you need and ensure that the tax adviser is kept at arm’s length.
So, can your company afford to ignore Keyman Insurance? You’ll be a brave or foolish man to say NO!
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