Key Man Insurance – FAQ’s

Find the answers to Key Man Insurance – frequently asked questions. Learn how to calculate the appropriate cover levels and how to go about policy set up. You can also send an enquiry, and view our client customer testimonials.

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top-tips

  1. The tax implications of both the premiums and benefits are dependent on how the cover is set up and whether it covers both revenue loss and associated loans to the company, which is why these policies should be separated.
  2. You should consult your company tax and legal advisors, when considering taking out key-person insurance and then come to One Quote to ensure both convenience and best value!

 

Key Man Insurance – Frequently Asked Questions

Who are your key people?
  • They are the ones who steer, create and drive your business
  • The people without whom your business would lose sales and profits or without whom even the basic viability of your business would be shaken
  • Look at the Directors, Partners, owners and beyond
  • Consider the roles of senior managers in sales, technical development and operations – the roles will change in every business but the candidates are sure to jump out at you
  • Insuring these people will provide the extra cash needed to take on temporary staff or recruit and train a replacement
Why Consider Key Person Insurance?

Key person insurance is worth considering if your business relies on an individual or individuals – whether that is to design products and systems, to generate new business, or if they have specialist skills that are crucial to the success of the business. The loss of a key person could have a significant impact on your business and key person insurance is designed to provide an income to cover potential lost revenue plus the costs of sourcing and training a replacement member of staff. It can also be used to cover any business loans guaranteed by that Key Person.

How does Key Person Insurance work?

Key person insurance is a type of life insurance policy that is taken out by a business on the life of a key employee. It is also possible for the policy to pay out in the event of the key person being diagnosed with a specified serious illness such as cancer or heart attack.

Should the key person die or suffer a serious illness, the policy would pay out a lump sum to the business and the business can use these funds to cover the costs associated with losing the key employee, whilst they recruit a replacement.

What does key Person Insurance cover?

The loss of a key employee could have a significant impact on the company’s income or future profit and it could be extremely expensive to find a replacement for this employee (recruitment and training costs). Key Person insurance is designed to cover loss of income / profit plus the cost of sourcing a replacement employee. It can also be used to cover any loans to the company made or guaranteed by the key person. Key person cover can be taken out at any time and will pay out a lump sum in the event of the key person’s death or being diagnosed with a specified serious illness (if serious illness cover is added to the policy)

How do I set up Key Person Insurance?

Key-person insurance is essentially a term assurance policy taken out by a company on the life of the key-person. The company must firstly record the need for this cover at a board resolution and then complete an application form. The application form should have the company as the owner and payee and the key person the life assured.

How much cover should I put in place?

The cover amount should be based on the anticipated loss of profits, as a result of the loss of the Key-person, as well as the costs associated with the recruiting and bedding in of a successor. It can also include an amount to cover any personal loans to the company, or loans guaranteed by that key person.

What policy term is most appropriate?

Typically, companies opt for a policy term of between 5 – 10 years and include a continuation option if they want the option to extend the cover in the future, without the need for fresh medical information at the time.

Should I include serious illness insurance?

Of course this is an option and its worthwhile comparing quotes. Should the company decide to include serious illness protection, we would recommend they do so on an accelerated basis (any serious illness pay-out acts as an advance payment of the life cover amount) so as to include the cover, while minimising the associated cost.

How long does it take to set up?

It depends on the age and health of the life assured, as well as the level of cover required, however it normally takes anywhere between 2 and 4 working weeks, from return of a completed key person insurance application form.

How do I ensure best value for money?

We compare all leading key person insurance providers in Ireland, to ensure the best cover at the best market price. We provide extra discount on 10 year term policies, and our “best value guarantee” means we refuse to be beaten on price!

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