Business Protection

Key Person Insurance is a type of business life insurance that protects a company if a crucial employee, such as a founder, director, or top performer, dies or becomes critically ill. The business takes out the policy, pays the premiums, and receives a payout if the key person can no longer work. This money can help cover lost revenue, recruitment costs, or business stability during the transition.

Key employees are those whose skills, knowledge, or leadership are vital to the business’s success. This could be the founder, directors, top salespeople, or specialists whose loss would cause financial strain. To identify key employees, consider who directly generates revenue, manages critical operations, or holds relationships essential to the business. If their absence would impact profits, client retention, or daily operations, they’re likely a key person.

It depends on the policy. Standard Key Person Insurance typically covers death and terminal illness. However, you can add Critical Illness Cover, which pays out if the key employee is diagnosed with a serious condition like cancer, a heart attack, or a stroke. This can help the business manage financial losses while they recover or replace their role if they can't return to work.

Relevant Life Insurance is a tax-efficient life cover for employees, directors, and business owners in the UK. It’s paid for by the company and provides a lump sum to the employee’s family if they pass away during the policy term. Unlike standard life insurance, it’s considered a business expense, so there are potential corporation tax and National Insurance savings. It’s ideal for small businesses that don’t offer a group life insurance scheme.

Relevant Life Insurance is designed for UK business owners, company directors, and employees of limited companies. The business takes out the policy on behalf of the employee, pays the premiums, and the payout goes to the employee’s family via a trust. Sole traders and partnerships can’t take out this type of cover for themselves, but they can offer it to employees.

Because the premiums are paid by the business rather than the individual. In most cases, premiums are considered an allowable business expense, meaning they can be deducted from corporation tax. Unlike personal life insurance, there’s no income tax, National Insurance, or benefit-in-kind charge for the employee. The payout is also typically tax-free when placed in a trust, making it a cost-effective way to provide life cover.