I’m a Company Director, do I need Key Person Insurance?

When you set up your limited company for the first time you spend a lot of time making sure that the company has adequate insurance in a number of different areas e.g. insuring your vehicles, property, public liability, professional indemnity etc. etc.

However, one of the main assets of the business is often overlooked when taking out these policies … you … the company director!

 

What is Key Person Insurance?

Key Person Insurance is a business-specific life insurance that lots of company directors overlook. It can compensate a company for the financial loss and other consequences of the death or serious illness of an important member of the business.

If something very unfortunate happens i.e. you become seriously ill or pass away, the policy will provide a lump sum to the company to compensate for this event. This financial pay-out may be enough to keep your business on an even keel. It will resolve cash flow issues caused by the loss of profit and it can also cover the cost of hiring and training a replacement.

You can take out Key Person Insurance at any stage of your company's lifetime. You will pay a premium on a regular basis, based on the cover that is required. It can also be used to contribute to bank loans where you, as the key employee, gave a personal guarantee, or to pay off loans that you would have given to the company to get it off the ground.

 

 

 

Date published 6 Jul 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.