What is Key Person Insurance?

Key Person Insurance (KPI) is a type of Business Protection Insurance that provides financial compensation for a company for the loss of profits and/or the expenses occurred for recruiting a replacement on the death of a key person employed by the company.

Depending on the type of key person insurance policy taken out by the company, a payment will be made as a lump sum to the beneficiaries of the policy in the event of a claim being made.

 

What are the types of Key Person Insurance?

The following are the types of Key Person Insurance available:-

  • Short Period Term Assurance provides short term life cover in the event a key person leaves earlier than expected, (eg retires or resigns) from the company. Term cover can be provided usually for 5 or 10 years.
  • Renewable Term Assurance provides short term life cover in the event a key person leaves earlier than expected, (eg. retires or resigns) from the company. Term cover can be extended to provide additional years beyond the usual 5 or 10 years
  • Unit-Linked Whole of Life Policy pays out a lump sum to the beneficiaries in the event a key person leaving the company and the policy is cashed in for a surrender value, or provides a lump sum on death of the key person. This is particularly suited for company owners, where there may be no known retirement date.

Critical Illness cover can also be provided to cover for serious illness of a key person.

 

Why should I take out Key Person Insurance?

The main purpose of Key Person Protection insurance is to provide financial protection so that the business can continue with the least disruption in the event of a claim.

For this reason KPI’s are normally written on the life of another basis where the payer of the premiums and beneficiary will be the Company.

There are a number of factors about an organisation’s specific circumstances that will determine which of the types of key person protection insurance that may be applicable based on their suitability and affordability.

 

How should I take out Key Person Protection Insurance?

The first and most important step after you have decided you may have a need for business protection insurance cover is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of key person protection insurance cover is for your company’s particular circumstances we make an application on your behalf to take out a protection policy based on how much you can afford and the amount of cover required, for a length of time to match your needs.

 

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk