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Key person protection

Keep your business up and running

Have you ever thought what would happen if you or one of your business partners fell seriously ill, or worse? If not, it might be time to prepare.

By putting the right protection in place for shareholders and key personnel, you’ll have a stable financial platform for your business if the unexpected happens. It could help to make up for lost profit, provide the funds needed to bring in a replacement, or simply give you breathing space to sort out the ownership of the business. Whatever your business needs, having shareholder and key person protection will help you avoid the damage and chaos losing a senior figure can cause. And at the same time, buy you more time to deal with the issues at hand.

The level of cover obviously depends on the type of policy you take out. But while you may be comfortable with losing key staff, your shareholders, bank managers, suppliers and clients may not be so relaxed. That’s why at Allisons, we advise all our clients to think about covering themselves for the worst.

Key person insurance explained

Key person insurance is also known as key man insurance, or business life insurance. It’s a policy your business takes out on the life of a key person. The business acts as the beneficiary of the policy and pays the monthly or annual premiums. If you make a claim inside the term of the policy, your business will then get either a lump sum payment or a regular monthly sum, depending on your agreement.

It’s all designed to protect your business when someone key to the running of your company passes away, or finds themselves unable to work due to illness. Usually, a key person is a business owner or director. Yet it could be any member of staff with skills that are crucial to the running of your business. For instance, if you owned a small business fixing computers, and the person who fixed the computers fell seriously ill, the business would grind to a halt until you found someone new.

Don’t wait for the worst to happen

Unsurprisingly, it’s often smaller businesses that overlook key person insurance. That’s because owners have more priorities to juggle and less room in their budgets for extra expenses. But these same businesses also have the greater need. A strong leader or highly skilled person is hard to replace. Losing just one employee could have a much bigger impact than in larger organisations. Plus, the uncertainty can affect the remaining team.

That’s why it makes sense to protect your business, even if it doesn’t seem urgent right now. Having key person insurance in place will give you and your team peace of mind. And should the worst happen, the financial fallout will be far less. What’s more, your business will stay up and running, even during difficult times.

Why take out key person insurance:

  • Make up for loss of profits during business disruption
  • Protect debt repayments
  • Pay back a business overdraft or loan
  • Cover employee salaries
  • Pay for the recruitment of someone new
  • Pay penalties for non-delivery or late delivery on goods and services
  • Pay an account upfront
  • Cover sole traders who are personally liable for their business debts

How do I find the right policy?

Fully-fledged business or a budding start-up, if you own a company, it’s wise to consider key person cover. But you don’t need to figure it all out on your own. We advise businesses across the UK on the best insurance policies for them. As independent advisers, we’ll even search the whole of the market to find you the right cover, at the best price.