Cover for Key Person

Providing financial protection against lost revenue profits and the capital value of your business should a key person suffer a major illness, injury or death.

Key person insurance (also called key man insurance) is a type of corporate-owned life insurance which insures an employer against the death or incapacitation of a so-called key employee, usually an executive or partner. It is used by both large companies and small partnerships alike.

An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer may suffer in the event of the loss of a key person.

The key person may be an executive, principal shareholder, a senior scientist, or a particularly effective salesperson.

Smaller companies with partners may use it to protect each partner. For example, if a partner of a firm passes away, usually the other partner or partners need to purchase the shares in the business from the family of the deceased. Having insurance permits this to be more easily facilitated where the correct buy/sell agreements are in place. Buy/sell agreements are a written agreement the business enters into to determine each stakeholders’ plans should any of them unexpectedly suffer a major illness, injury or death.

The cover required is usually determined by the size of the business and the person that is to be insured.