Key Person Insurance
Everything you need to know about Key Person Insurance.
Who Is A Key Person?
A Key Person is an individual within a company that the company requires in order to succeed. Therefore, their being in the company is ‘Key’ to that company.
When applying for Key Person insurance you will likely have some of the following that are integral to the company you work for:
- Skills
- Leadership
- Experience
- Knowledge
Essentially you are a Key member of staff for that company, not neseccarily the owner or director.
Who Pays The Premiums
The company or business will pay the premiums on a Key Person insurance policy. This is because the policy is there to compensate the company or business if the person should die within the term of the policy.
If you wanted to compensate the family of the person for their loss you should probably consider a relevant life insurance policy.
Who Can Get Key Person Insurance
Any person that is Key to the business or company could be considered for key person insurance. This is to protect your business. If your company could not function properly in one way or another then that person could potentially be considered Key to the running of that company/business.
How Does Key Person Insurance Work?
With Key Person insurance the company or business takes out a Life insurance policy on the Key person. The company pays the premiums and maintains the policy. The company or business is also the beneficiary of the policy, and therefore, if the Key person dies during the term of the policy, the company will receive the benefits.
The reason for this type of policy is so that if you have a person that is integral in some way to how a business runs, you may want to protect your business if that person is no longer there. It may take time to replace them, or they may be ireplaceable.
What Is Key Person Protection?
Key Person protection is another name for Key Person insurance. This was formerly known as Key man insurance. Essentially providing a lump sum to replace income that a Key member of your team would create for the company in one way or another.
Is Key Person Insurance Tax Deductible?
Key Person insurance is a business expense and is therefore usually Tax dedusctible. Whilst at Albion Forest we offer insurance and protection advice we do not offer Tax advice and would recommend you speak to the relevant tax professional if you would like to know more about this. Your Accountant can usually point you in the right direction.
What Is The Meaning Of Key Person?
A Key person is any member of your team that is Key to the profit of that company. This can be anything from leadership to having Key skills that are needed for the business.
What Is A Key Man Insurance?
Key Man Insurance is the term that used to be used for Key Person Insurance. For obvious reasons this changed in recent years.
They are the same though so we have covered this above.
What Is The Key Person Insurance Cost?
The cost of Key Person insurance will vary from person to person.
The cost will vary depending on:
- How much cover is required
- How long it is required for.
- The health of the person being insured
- Their smoker status
- Their age.
- The persons height and weight.
Other common types of insurance
- Relevant Life Insurance – We mentioned this previously, this is business protection taken out to benefit an employee’s family in the event of their death.
- Critical Illness cover – Usually taken out privately in order to provide a lump sum in the event of a person being diagnosed with a specified critical illness.
- Income Protection – This type of insurance cover will usually provide a monthly amount if the person is unable to work.
This type of protection can be integral to the survival of a company. Taking out such cover should be carefully considered.
If you’d like more information please get in touch with one of our expert advisors.
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